The IRS has postponed a contentious tax reporting rule affecting individuals earning over $600 online via payment platforms such as Venmo and PayPal.
The proposed rule would have required platforms like Venmo, PayPal, Etsy, and Airbnb to send Form 1099-K to both the IRS and users for transactions surpassing $600 annually.
In 2023, the IRS will introduce a transition year, sparing users from Form 1099-K unless their income exceeds $20,000 or they have 200 transactions. Come 2024, the reporting threshold rises from $600 to $5,000.
According to Fox News, this is the second time the IRS has delayed the reporting threshold.
“Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion,” said IRS Commissioner Danny Werfel. “It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals, and others in this area.”
The rule only covers payments for goods and services, excluding gifts, rent, and reimbursements. Selling personal items at a loss, like a couch bought for $300 and sold for $250, is not taxable.
“This doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips,” PayPal previously said.
The change aimed to combat tax evasion by ensuring full income reporting.
However, some argue that it’s excessive government control, which potentially harms small businesses.
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