- The IRS is delaying the requirement for people to report income over $600 paid through apps like Venmo.
- For 2023, taxpayers will only need to file a report if they receive over $20,000 and have more than 200 transactions.
- The IRS plans to gradually phase in the $600 reporting threshold, starting with a $5,000 threshold for tax year 2024.
The IRS announced on Tuesday that it is delaying a controversial new requirement that will require people to report income in excess of $600 paid through apps such as Venmo. The decision came after an outpouring of feedback from taxpayers and tax professionals. As a result, taxpayers won’t have to file such a report unless they receive over $20,000 and had more than 200 transactions this year.
The IRS stated, “As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation.” The requirement was passed by Congress in 2021 and attracted criticism from Republicans, who argued that the $600 rule was unduly onerous for taxpayers. This push is part of a broader effort from Democrats to empower the IRS to collect more revenue through increased funding and resources.
The IRS had already delayed the provision’s implementation once before, highlighting the complexity of implementing such a sweeping new rule. On Tuesday, the IRS announced that due to the complexity of implementing the requirement, it plans to peg the threshold at $5,000 for tax year 2024 as part of a gradual phase-in to implement the $600 reporting threshold. The agency is also looking into updating certain tax forms and schedules to make the reporting process easier for taxpayers.
IRS Commissioner Danny Werfel said that after months of feedback, it has become clear that additional time is needed to implement the new reporting rule correctly. He stated, “The IRS will use this additional time to continue carefully crafting a way forward to minimize burden. We want to make this as easy as possible for taxpayers. We will work to make the new reporting requirements easier for them, and we’ll work closely with third-party groups, tax professionals, and others to find the smoothest path to ensure compliance with the law.”
The IRS’s decision to delay the controversial $600 tax reporting rule for Venmo and PayPal payments is a victory for common sense. This overreaching rule, pushed by Democrats, would have unfairly burdened millions of Americans, adding unnecessary complexity to an already convoluted tax system. By listening to taxpayers and tax professionals, the IRS has acknowledged the need for a more gradual approach. While the IRS seeks to collect more revenue, it must balance its efforts with the risk of overburdening citizens. This delay is a step in the right direction, but the fight against government overreach must continue.
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