Etsy creators, Poshmark sellers, and side hustlers in general are receiving a Thanksgiving pardon from the IRS and its latest guidelines pertaining to digital sales and payment platforms. The new, drastically lowered $600 threshold to receive a tax reporting form from third-party settlement organizations such as Venmo and PayPal is delayed yet again.
First announced as part of the Biden administration’s 2021 American Rescue Plan, the regulation previously scheduled for the 2023 tax season substantially reduced the Form 1099-K benchmark for third party commerce service providers. Previously, those forms were only issued to people with more than 200 transactions or $20,000 in total profits. The new rules would drop the requirement down to just $600 in profit. The majority of such commerce is facilitated by services like the aforementioned Venmo and PayPal, as well as Square and Zelle. Ensuing backlash from lawmakers, tax filing companies, and the public eventually caused the IRS to issue its first delay in December 2022.
On Tuesday, the IRS conceded the estimated 44 million pending Form 1099-K’s could result in unnecessary “potential confusion” this year for “many taxpayers who wouldn’t expect one and may not have a tax obligation.”
“We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” IRS Commissioner Danny Werfel said in Tuesday’s announcement. “It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”
[Related: How to avoid tax season stress.]
The government’s newest pause comes alongside a more detailed, transitional plan before the $600 limit goes into effect in 2025. The 200 transaction, $20,000 profit margin will lower to $5,000 for tax year 2024, although the IRS did not specify the number of transactions in its November 21 statement. The originally intended $600 limit will finally move into place the following year. The IRS also revealed new plans to update and simplify the existing Form 1099-K “to make the reporting process easier.” Basically, you won’t receive an official tax form for upselling thrift store finds in your spare time until early 2026—and when you do, it should hypothetically be less of a headache.
Although all this really just boils down to delaying the inevitable, the US government is also forging ahead with ways to make tax filing both simpler, and potentially cheaper. The upcoming 2024 filing season will finally see the long-awaited IRS free federal direct tax filing pilot program for certain eligible citizens in 13 participating states. The no-cost option is intended to eventually become nationally available as an alternative to third-party filing services like Intuit TurboTax and H&R Block. Such companies have come under increasing regulatory scrutiny in recent years for allegedly predatory practices, deceptive advertising, and privacy concerns.
As for those of you with extremely lucrative side gigs—sorry, the $20,000 limit will remain in place for 2024. While third party services usually automatically generate forms for anyone exceeding the IRS 1099-K threshold, that’s not the case for everyone else. Meanwhile, the IRS also reminded the public that business income has always been taxable, and it’s still up to Americans to report such profits even if they don’t receive a Form 1099-K. Do with that information what you will.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : Popular Science – https://www.popsci.com/technology/irs-1099-form-delay/
