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IRS ditches new tax requirement for now that would have caused ‘lots of confusion’

Funviralpark 1 year ago 0 1

The Internal Revenue Service is delaying the new $600 reporting threshold for 1099-K tax returns. It’s a move many tax experts believe will help avoid potential disruptions this upcoming filing season.

The latest law enacted by the American Rescue Plan allows third-party transaction networks such as Venmo, Paypal, eBay, and Etsy to issue 1099-Ks to users who have made payment transactions of $600 or more during the year. I had to. The previous threshold was $20,000 for 200+ transactions.

Many expert groups have called for more time to implement, noting that the unexpected forms scheduled for January will cause disruption to many Americans who use payment services for many tax-exempt events. Did.

“We are grateful to the IRS for providing us with this important relief.In 2023, millions of people will be able to split meals, sell second-hand goods, give back to friends, or pay taxes. We will not unnecessarily burden your tax returns for other instances of no income, the Coalition for 1099-K Fairness told Yahoo Finance in a statement after the deferment was announced before the Christmas holidays. rice field.

The IRS delays reporting requirements for third-party transaction networks such as Venmo and Paypal.

“A lot of confusion”

While the lower reporting standards were intended to capture electronic cash income from side jobs, part-time jobs, or small businesses, experts say many taxpayers are 1099- I am concerned that I may have received a K.

“That’s probably the biggest concern,” Tom O’Saben, CFP and director of tax content for the National Association of Tax Professionals, told Yahoo Finance before the postponement. “People may be receiving forms of government that look like income that is just a gift that goes back and forth between families.”

Or split the tab when dining out, he added.

“You and I go out to dinner, you pay the check in full, and I reimburse your Venmo for this completely personal expense,” he said.

Selling second-hand goods for $600 or more and receiving payment through a third-party cash app also triggers reporting requirements, generates a 1099-K form, and requires additional taxes to prove the event is not taxable. You may have requested a tax return calculation.

“If you sell a sofa for $800, you know it’s probably going to cost you $2,500 brand new,” Oseiben said before the postponement. [would have been to] Put that $800 into Schedule 1, line 8Z as miscellaneous income, to adjust for Schedule 1 income… let’s say the cost of the couch is $800… it’s listed on your tax return but zeroed out. ”

“There’s a lot of confusion and a lot of anxiety and a lot more administrative burden,” added O’Saben.

Enlarged view of Form 1099-K, Payment Card and Third Party Network Transactions. An IRS information return used to report certain payment transactions to improve voluntary tax compliance.

Enlarged view of Form 1099-K, Payment Card and Third Party Network Transactions. An IRS information return used to report certain payment transactions to improve voluntary tax compliance.

Ryan Ellis, director of the Center for Free Economy and an IRS-registered agent, estimates that tens of millions of forms would have been distributed in early January had the delay not been in place.

“They’re going to email all our mailboxes and inboxes and say, ‘What the hell is this?'” he told Yahoo Finance before the delay was announced.

Experts hope the delay will give the IRS more time to provide a smooth transition when reporting standards are actually enacted. O’Saben said the platform will have more time to issue detailed guidance so it can better distinguish between taxable and tax-exempt transactions.

“The additional time will give the IRS more time to determine which tools to use to properly report these items,” O’Saben told Yahoo after the delay was announced. wrote in Finance.[The] This announcement is welcome news for providing additional time for compliance education and providing a means for third-party payment companies to separate business and personal transactions. ”

Rebecca is a reporter at Yahoo Finance.

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