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Delayed Implementation of $600 threshold for 1099-K (Venmo, CashApp, PayPal, Etsy, etc.)

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In 2022 the threshold for reporting payments received through a third-party platform (Venmo, PayPal, CashApp, etc...) was reduced from $20,000 to $600. However, on December 23, 2022, the IRS announced that the decreased threshold would be postponed until the 2023 tax year. The change was delayed until 2023 in order to provide payment platforms more time to implement this into their systems to ensure accurate filing of Forms 1099-K. 

The big question is "Will this affect me?" If you sell goods or services and use third-party payment services to receive money, then you should expect to receive a 1099-K that reports your income to the IRS. This is not a change in how taxes are assessed since the income is taxable even if no 1099-K was received in the past, but instead is a change in how the money is reported to individuals and the IRS. 

If you do not sell goods or services on a third-party payment service and all your transactions are for reimbursements or personal gifts, then you should not receive a 1099-K. The payment system uses the classification of the payments to determine what transactions should be included on the 1099-K and which ones are personal income/expenses. If the transaction is classified as an exchange between "Friends and Family" then the payment provider will not include it on the 1099-K. However, if the payer designated the payment as "Goods and Services" then the service will know to include it on the 1099-K. 

If you are concerned that sales of Goods or Services will impact your taxes please contact us to set up a tax planning appointment.  



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