IRS Delays Implementation of New Tax Reporting Threshold for Mobile Payments

Dec 28, 2022 | GTM Blog, Newsworthy, Tax & Wage Laws

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The IRS is delaying the implementation of a new tax reporting threshold for mobile payments that was set to take effect for the upcoming tax filing season. Here’s what it means for babysitters and household employees.

The IRS is delaying the implementation of new reporting thresholds for third-party settlement organizations (TPSOs) that were set to take effect for the upcoming tax filing season.

As a result of this delay, TPSOs like Venmo, PayPal, and CashApp will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.

While the intent of the new requirement is aimed at businesses that use these apps to get around banks and traditional forms of reporting income, household employees and babysitters who are paid by a mobile app would have been swept up in the new rules.

The IRS says that the calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for TPSOs that would have generated Form 1099-Ks for taxpayers.

Now service-related payments made by a mobile app starting January 1, 2023, that exceed the $600 threshold in aggregate payments will be reported by the TPSO by providing Form 1099-K to the payee and the IRS. Form 1099-K will now be issued in January 2024.

Read our original article on the new reporting rule: New Tax Reporting Rule May Change How You Pay a Nanny or Babysitter

“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “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.”

According to Bloomberg, congressional lawmakers from both parties also “expressed interest in raising or delaying the $600 threshold, but they were unable to include such a change in the year’s spending bill.”

The American Rescue Plan of 2021 changed the reporting threshold for TPSOs. The new threshold for business transactions is $600 per year; changed from the previous threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000.

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