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Yes, the IRS has delayed the introduction of a $600 tax reporting rule for payment apps.

Here’s what you need to know about payment apps and taxes since the latest IRS announcement.

Payment apps like Venmo, PayPal, and Cash App have been tasked by the 2021 American Rescue Plan to send tax forms 1099-K to the Internal Revenue Service (IRS) and people who have earned at least $600 through the platforms.

People were supposed to start receiving forms in January 2023, just in time for the 2022 tax filing season. But viral tweet Published Dec. 23 claims that the IRS has delayed the reporting requirement.

“Cash App, Venmo and Paypal are no longer required to send you 1099-K for $600 transactions,” the tweet read. “Instead, it will be $20,000.”

Recent web searches also show that some people are wondering if the introduction of the tax reporting rule has been delayed.

QUESTION

Has the IRS delayed a $600 tax reporting rule for payment apps?

SOURCES

ANSWER

Yes, the IRS has delayed a $600 tax reporting rule for payment apps.

WHAT WE FOUND

Third-party settlement organizations, including payment apps like PayPal, Cash App, and Venmo, will not be required to send Forms 1099-K to anyone who made at least $600 in 2022 with these apps, the IRS announced Dec. 23.

Form 1099-K is “used to provide tax information to you and the IRS” about your transactions through a payment app or other online service, H&R Block’s tax preparation service explains. The payment application or online platform will send you a copy of Form 1099-K for tax preparation and another to the IRS.

A reduced reporting threshold of $600 was included in the 2021 American Rescue Plan, a measure designed to prevent people from underreporting income. The Joint Committee on Taxation has estimated that this change in reporting requirements will increase tax revenue by $8.4 billion from 2021 to 2031.

Prior to the adoption of the American Plan of Rescue, payment platforms were only required to submit Forms 1099-K to anyone who earned more than $20,000 from more than 200 transactions.

As the IRS delays the introduction of the new reporting threshold by one year, payment applications will send Forms 1099-K to taxpayers who earned at least $600 in 2023, not 2022.

As in previous years, PayPal and Venmo will continue to report $20,000 across more than 200 transactions, PayPal VERIFY said. Cash App did not respond to a request for comment.

This new reporting requirement does not mean that people can avoid paying taxes. The IRS requires people to report all taxable income they receive, whether they receive Form 1099-K from a payment app or other online platform – this is not new.

The IRS announcement comes after some taxpayer advocates, including Collins, raised concerns about taxpayer confusion and the ability of third-party settlement organizations to meet the new $600 reporting threshold.

Collins said some taxpayers could receive a Form 1099-K under the new rule if their payments are incorrectly classified as income, even though the law doesn’t aim to track personal transactions, such as paying friends or family meals or paying bills. household.

More from CHECK: No, not all $600 payment application transactions need to be reported to the IRS.

“Reducing the threshold from $20,000 to $600 significantly increases the number of 1099-Ks issued,” Collins said. “The deferral should give taxpayers more time to review the rules and, more importantly, to properly identify personal and business payments to prevent misidentified payments from being reported on Form 1099-K at the end of the year.”

The $20,000 1099-K reporting threshold is a federal rule set by the IRS. Some states have their own lower reporting thresholds, as listed on the PayPal and Meta websites.

In Vermont, Massachusetts, Virginia, and Maryland, the 1099-K reporting threshold is $600 per year, regardless of the number of transactions. The threshold in Illinois is $1,000 per year with at least four payment transactions processed.

Anyone who meets the reporting thresholds in these states will receive a Form 1099-K.

When using payment apps, Collins recommends making sure that personal payments, such as gifts or compensation, are classified as something other than goods and services. You can also create separate personal and business accounts to separate these transactions.

To learn more about what to do if you received a Form 1099-K but the money you receive is not income, click here.

CORRECTION. This article previously stated that the 1099-K reporting threshold of $20,000 for more than 200 transactions will remain in effect through December 31, 2023. The IRS has confirmed that this is a typo and the deferral only applies to transactions for 2022. The article has been updated to reflect this information.

The VERIFY team works to separate fact from fiction so you can understand what is true and what is false. Please consider subscribing to our daily newsletter, text alerts and our YouTube channel. You can also follow us on Snapchat. Twitter, Instagram, Facebook and TikTok. learn more”

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