In what will be great news before the end of the year for small business owners and millions of Americans, the Internal Revenue Service (IRS) announced on Dec. 28, 2022, it would delay the implementation of the tax reporting change for payments apps such as Venmo and PayPal. On March 22, 2023, the IRS clarified some points in the process.
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The new guidance lays out what a gain or loss from selling a personal item means and which forms are required, in addition to a 1099-K. Basically, if you made money on the sale you need to fill out a Form 8949, Sales and Other Dispositions of Capital Assets and then add the gain to your 1040 form under Schedule D, Capital Gains and Losses. If you sold your item for less than you paid for it, you’ll notate the difference in Part I, Line 8z: Other Income and reference the 1099-K form.
In addition, if you received a 1099-K in error you can still use alternative reporting on Schedule 1, line 8z.
Previously, they had announced that for this tax season, the reporting requirement for payments above $20,000 and exceeding 200 transactions within the calendar year will remain, instead of the much lowered new $600 amount.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” acting IRS Commissioner Doug O’Donnell said in a press release. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. 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.”
This lower threshold was enacted in the American Rescue Plan (ARP) back in March 2021. The new rules require users to report payment transactions via payment apps including Venmo, PayPal, Stripe and Square for goods and services meeting or exceeding $600 in the calendar year.
The IRS added that it will provide additional details on the delay “in the near future,” along with additional information to help taxpayers and the industry.
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Following the agency’s announcement, Sen. Joe Manchin (D-W.Va.), who has been a staunch critic of the new rule, said in a statement: “I am pleased the Treasury Department and the IRS listened to my request to delay the 1099-K reporting requirement that will harm small businesses and individuals who sell goods online across America. This will allow Congress more time to correct this regulation that puts undue burden on our small businesses. I will continue working with Treasury and my bipartisan colleagues to find a permanent solution that supports our small businesses in West Virginia and across America.”
In mid-December, Sens. Joe Manchin and Bill Hagerty (R-Tenn.) proposed an amendment to the $1.7 billion funding package to raise the $600 reporting requirement for third-party payment networks such as Venmo and PayPal to $10,000, as GOBankingRates previously reported. “This is the best relief we can get for people,” Manchin told CNBC about the $10,000 threshold.
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This article originally appeared on GOBankingRates.com: Taxes 2023: IRS Updates Guidance on Venmo, PayPal and Third-Party Payment Apps
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