Last Minute Proposals Surface To Adjust or Delay 1099-K Reporting Requirement – Update 12/22

On Tuesday, we learned there was an amendment in the works to the $1.7 trillion spending package by Senator Bill Hagerty and Senator Joe Manchin to raise the reporting threshold for 1099-K forms from $600 to $10,000.

As a recap, before 2022, payment processors like PayPal and Venmo, and online marketplaces that facilitate payments between users like eBay and Etsy had to issue a 1099-K form only if the taxpayer (seller) had more than 200 transactions and $20,000 in revenues during the calendar year.

But the American Rescue Plan Act of 2021 dropped this threshold to $600 and provided no provisions to distinguish between personal and business transactions.

The knock-on effect of this change was that even private sellers on a marketplace like eBay selling used items out of their closets could end up with a tax form on income that is typically not taxable under IRS rules.

Also, consumers started to worry that transactions on PayPal and Venmo payments services, often used to reimburse friends and families for expenses or for sending money as a birthday or Christmas gift, could trigger the year-end tax form.

There have been several bills in Congress to change this new law, with one modifying the threshold to $5,000 and another resorting back to the original threshold of $20,000. However, both seemed stalled.

And just last month, there was a letter sent to the acting commissioner of the IRS, Douglas O’Donnell, by a group of Republican lawmakers requesting the IRS delay implementation of the new rule, providing some temporary relief to taxpayers while Congress considers the impact of the regulation.

Even as the year was coming to an end, many sellers and consumers kept hope alive that an amendment could find its way into the bipartisan government spending bill for 2023, adjusting the 1099-K threshold.

Last Minute Hope for 1099-K Relief

Well, this news appeared to keep the hope alive with the then yet-to-be-filed amendment adjusting the threshold from $600 to $10,000.

“This is the best relief we can get for people,” Manchin said to CNBC as he believes there is broader support for raising the limit to $10,000 than delaying implementation of the rule. It’s “the best way to approach it,” he added. We’ll see if he is right.

Update 12/22/2022 3:08 pm

However, since then, we’ve not been able to find this amendment, and Republican Senator Bill Hagerty has come out in opposition to the big spending package and now has voted against it.

However, two new amendments had surfaced that would’ve delayed the implementation of the rule, presumably to give Congress more time to sort out a better solution in the future.

Democratic Senator Joe Manchin filed an amendment to delay the implementation of the current $600 threshold for 1099-K reporting until 2024. While Republican Senator Shelley Moore Capito introduced a similar amendment, but with a delay only lasting until 2023.

The spending was passed by the Senate this afternoon and none of the 1099-K related amendments were considered.

Senator Manchin released a statement, saying, “I urge the IRS to use their authority now to delay the implementation and allow Congress to continue working to find a lasting solution that prevents this harmful regulation from impacting small businesses.”

This story and headline have been updated with additional developments.

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