The IRS said it is delaying a controversial requirement by one year that would have led to more online sellers and gig workers having income reported to the nation’s tax agency.
Thewould have required payment platforms such as Venmo, Paypal or Cash App to send tax forms called 1099-Ks to anyone receiving over $600. Previously, such payment services only had to report users’ income to the Internal Revenue Service if they had more than 200 transactions, exceeding $20,000 in revenue.
Online selling platforms including eBay, Etsy and Poshmark had pushed back hard against the proposal to lower the reporting limit to $600, claiming it would create confusion and make it harder for sellers to earn a living. Meanwhile, Republican members of Congress said the plan was an example of government overreach that would ensnare people using apps to pay friends and family.
“The IRS and Treasury heard a number of concerns” about the changes, acting IRS Commissioner Doug O’Donnell said in a Friday statement. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation” of the new rule, the statement said.
“The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” he added.
Transfer more than $20,000? You’ll still get a form.
Even though the delay means that people during the 2023 tax season will only get tax forms if they meet the earlier guidelines of receiving more than $20,000 in payments and making more than 200 transactions in a year, anyone who makes a profit from any sort of income is legally required to pay tax on that money.
That means even if people don’t receive a tax form, they are still required to report the income and pay tax on it. However, the IRS underscored that personal transactions, such as repaying a friend for a shared meal, aren’t meant to be tracked by the now-delayed rule on reporting $600 in side-gig income.
“The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill,” the IRS emphasized Friday.
Some tax professionals had also warned that people who used apps for business as well as personal transactions could be confused by amounts reported on the new forms and potentially wind up paying more than they would need to in taxes — or have to spend hours untangling their finances to determine what was business income and what wasn’t.
It’s also likely that many online sellers who sell only small amounts as a hobby aren’t keeping track of their actual income and expenses related to their online endeavors, experts say.