IRS Steps In, Postpones 1099-K Implementation of $600 Threshold Regulation For One Year

After Congress failed to put in a permanent or temporary reprieve for millions of Americans selling on online marketplaces like eBay or Etsy — or receiving payments from side hustles via payments apps like PayPal or Venmo — the IRS stepped in on Friday and played Santa.

The agency announced it would postpone the implementation of the new lower $600 threshold for one year that would have required payments and marketplace platforms to issue 1099-K tax forms to its users next month.

This delay means there won’t be an avalanche of 1099-K being sent out in January to users of these platforms if they transacted less than $20,000 and 200 transactions, which is the old threshold.

“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.”

Will Congress Act To Fix the 1099-K Problem in 2023?

While this notice delays the implementation of the new requirement, the hope now is that Congress may take up one of the pending bills that would permanently change the threshold.

Unfortunately, while a delay is welcomed, it also means that some sellers may still stay on the sidelines without knowing how marketplaces like eBay will be able to distinguish between taxable income from sales for profit and income from sales of personal items, normally not taxable.

This is one of the many reasons eBay CEO Jamie Iannone pushed on Congress to come up with a permanent solution now.

At least this is a small Christmas gift to some folks as many personal and micro-sellers that did not sell more than $20,000 and had more than 200 transactions, won’t have to run to tax preparers next year trying to figure out how to account for the income reported on Form 1099-K. Although state thresholds still apply.

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