IRS delays reporting rule for $600 electronic payments

The IRS said Friday it was delaying a new plan that would have subjected Americans’ electronic payments on apps such as PayPal and Venmo to new scrutiny, bowing to intense pressure from consumers and Congress.

The rule would have required companies to file a form showing total payments of $600 or more for taxable transactions. With the delay, the old threshold for reporting — at least 200 transactions and $20,000 in total payments — remains in effect for the tax year 2022.

Acting IRS Commissioner Doug O’Donnell said this year will now be a “transition period” so consumers and companies can figure things out.

“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,” he said.

Democrats had tucked the $600 reporting requirement in their coronavirus stimulus plan last year, figuring it would help the IRS go after people who were using cash apps to hide income from the IRS.

But people had worried that the companies wouldn’t be able to sort out taxable sales from other transactions such as reimbursing roommates for rent or friends sharing the cost of a meal.

The IRS echoed those worries in its announcement Friday, saying that while it valued the lower reporting requirements as a tool to get Americans to pay what they owe, “it must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them.”