IR-2023-221, Nov. 21, 2023
WASHINGTON — Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74 announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023.
As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
Given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).
Following feedback from the tax community, the IRS is also looking to make updates to the Form 1040 and related schedules for 2024 that would make the reporting process easier for taxpayers. Changes to the Form 1040 series – the core tax form for more than 150 million taxpayers – are complex and take time; delaying changes to tax year 2024 allows for additional feedback.
“We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” said IRS Commissioner Danny Werfel. “Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes to the Form 1040. It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”
The ARP required third party settlement organizations (TPSOs), which include popular payment apps and online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form 1099-K starting in 2022. These forms would go to the IRS and to taxpayers and would help taxpayers fill out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and services involving more than 200 transactions per year totaling over $20,000.
Nobody wants to face an audit from the IRS, but it can happen to anyone at any time. Having proper representation can greatly reduce the risk of being audited or help navigate through one if it does occur. A representative will ensure that all necessary documents are prepared and submitted accurately, minimizing any discrepancies that could trigger an audit.
One of the main ways in which IRS representation supports individuals and businesses is by helping them protect their personal assets from any potential tax-related issues. Tax laws are complex, and mistakes or misunderstandings can result in hefty penalties, fines, or even legal action from the IRS. With proper representation, you can ensure that your tax returns are accurate and filed on time, reducing the chances of facing any negative consequences.
Moreover, having an experienced representative who understands the intricacies of tax laws can also help you mitigate any risks associated with audits or investigations by the IRS. They will work closely with you to gather all necessary documentation and evidence to support your case, ensuring that you are well-prepared for any inquiries from the IRS.
The IRS temporarily delayed the new requirement last year.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.
However, the casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.
This complexity in distinguishing between these types of transactions factored into the IRS decision to delay the reporting requirements an additional year and to plan for a threshold of $5,000 for 2024 in order to phase in implementation. The IRS invites feedback on the threshold of $5,000 for tax year 2024 and other elements of the reporting requirement, including how best to focus reporting on taxable transactions.
“The IRS will use this additional time to continue carefully crafting a way forward to minimize burden,” Werfel said. “We want to make this as easy as possible for taxpayers. We will work to make the new reporting requirements easier for them, and we’ll work closely with third party groups, tax professionals and others to find the smoothest path to ensure compliance with the law. This is consistent with our Strategic Operating Plan. The IRS is focused on meeting taxpayers where they are and helping them get it right the first time.”
Expanded information reporting, which will occur as the result of the change in thresholds for Form 1099-K, is important because it increases tax compliance and can reduce burden on taxpayers seeking to follow the law. The IRS believes that expansion must be managed carefully to help ensure that Forms 1099-K are issued only to taxpayers who should receive them. In addition, it’s important that taxpayers understand what to do as a result of this reporting, and that tax professionals and software providers have the information they need to assist taxpayers.
IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation. IR-2023-221, Nov. 21, 2023 WASHINGTON — Following feedback from taxpayers, tax professionals and
In the midst of uncertain times, one thing we could all use a little more of is peace of mind. And when it comes to navigating the complex world of taxes and IRS matters, that peace can seem like an elusive dream. Discover four powerful ways that IRS representation can bring you the tranquility you deserve while ensuring your financial well-being remains intact.
Are you tired of juggling multiple accounts and drowning in a sea of paperwork? Look no further! In today’s fast-paced business world, streamlined account management is the secret weapon that can take your company to new heights. Say goodbye to chaos and hello to efficiency as we dive into how simplified account management can revolutionize your business. Whether you’re a small startup or an established enterprise, this blog post will uncover the game-changing benefits of adopting an organized approach for managing your accounts. So grab a coffee, sit back, and let us show you how simplifying your account management can unlock hidden potential and pave the way for unprecedented success!
Sarasota Tax Preparation Services Sarasota Tax Preparation Services It is tax time. Now is a great time to get some help with your taxes. Yes, it is true. Don’t be in denial, it is that time of year again, Tax Season. Once
(941) 755-9700
davidc@cozzetteaccounting.com
7365 Merchant Court, Unit 6 Sarasota, FL 34240
We are a full-service accounting firm that specializes in tax preparation and small business accounting services. We have been serving the Sarasota & Lakewood Ranch area for over 18 years and are dedicated to providing our clients with the highest quality of service possible.
Website Design By Customer Loyalty Agency LLC
Copyright © 2023 — Cozzette Accounting Co. LLC – All rights reserved.
Due to the high number of Tax Returns we are processing at this time, all new clients will file for an extension and schedule appointments to meet beginning May 6th.
Our office will be closed from August 28th through September 4th.
We will re-open on September 5th
