Before implementing its new $600 reporting level for third-party settlements, the Internal Revenue Service (IRS) claims that more clarification is necessary.
In 2022, the embargo will prevent third-party settlement companies from being obliged to record transactions worth more than $600, according to a recent press release from the IRS.
According to the IRS, the new threshold, which was introduced as part of the American Rescue Plan of 2021, will also be phased in beginning in 2022.
"The reporting of transactions above $600 is postponed to transactions that take place after the calendar year 2022 during the transition period outlined in Notice 2023-10. The goal of the transition phase is to promote a smooth transition for TPSO tax compliance and individual payee income tax reporting compliance. Any individual who receives payment for a business transaction from a third-party settlement organization is referred to as a participating payee in the context of a third-party network transaction."
Furthermore, the IRS has declared that it will, when the time comes, give the correct 1099 papers to taxpayers who ask for them.
"The IRS cautioned that it must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them, despite the fact that the change under the law is extremely significant because tax compliance is higher when amounts are subject to information reporting, like the Form 1099-K.
Tax preparers and software suppliers have the knowledge necessary to help taxpayers, and it's crucial that taxpayers comprehend what to do as a result of this reporting."
According to IRS Commissioner Doug O'Donnell, the additional time will let taxpayers easily adapt to the new system.
In particular, the IRS will put off implementing the 1099-K adjustments in order to facilitate the transition and provide clarity for taxpayers, tax experts, and business. According to the IRS, the extra time will help clear up any misunderstandings during the next 2023 tax filing season and provide taxpayers more time to prepare for and comprehend the new reporting obligations.
