The IRS postponed for a third time the effective date of Form 1099-K for reporting the $600 threshold for third-party settlement organizations (TPSOs). According to the Journal of Accountancy, the IRS will also treat both 2024 and 2025 as transition years, the agency stated on Nov. 26 in Notice 2024-85.
Form 1099-K reports on credit, debit, and stored-value card payments. It also applies to payment apps and online marketplaces.
According to the notice, a TPSO must report payments in settlement of third-party network transactions when the total payments for those transactions are more than $5,000 in the calendar year 2024, over $2,500 in the calendar year 2025, and more than $600 in the calendar year 2026 and after. The IRS also stated in the notice that extending the transition period will facilitate the transition for TPSO compliance with Sec-6050W (e) and participating payees' compliance with income tax reporting, the Journal reported.
Prior to the enactment of 2021’s American Rescue Plan Act (ARPA), TPSOs were permitted a de minimis exception from filing Form 1099-K for payees with 200 or fewer such transactions in the calendar year that had an aggregate gross of $20,000 or less. The Journal reported that the ARPA changed this de minimis amount to $600, with no minimum number of transactions, effective for calendar years beginning after Dec. 31, 2021.
The updates came as the IRS wanted to reduce uncertainty on the reporting requirements for payment card and third-party network transactions. The agency first lowered the reporting threshold from $20,000 to $600 in 2022, then postponed the implementation of that rule at the end of that year, and again at the end of 2023, deciding to treat 2023 as a transitional year. That means reporting will only be required for 2023 income if the taxpayer receives over $20,000 and has over 200 transactions in 2023, although taxpayers may still receive a form for amounts less than the required reporting amount.
In November 2023,
the IRS deferred changing the reporting threshold for third-party settlement organizations for a year. At the end of 2022, the agency announced a one-year delay and postponed implementation for another year.
The IRS expects to receive roughly 44 million Form 1099-Ks in 2024, which is about 30 million more than in 2023, but does not have a plan to analyze the data "to inform enforcement and outreach priorities,” the
Government Accountability Office found in November 2023.
The latest notice also states that, for the calendar year 2024, the IRS will not collect penalties under Sec. 6651 or Sec. 6656 for TPSOs that are not withholding and paying backup withholding tax in the calendar year, according to the Journal.