PayPal, Venmo, and other cash app users who depend on digital payment platforms for business transactions can breathe a temporary sigh of relief. The Internal Revenue Service has delayed the implementation of a tax code change that would’ve mandated declaration of any exchanges over $600 by one full year, according to a Friday news release.
Currently, payments through apps and sites like Venmo, Etsy, StubHub, and Airbnb trigger the mandatory issue of a 1099-K form to a business user if their account accrues at least 200 transactions totaling $20,000 or more in a year. However, a tax tweak passed in 2021 as part of the American Rescue Plan lowers that threshold to just $600.
The shift was supposed to go into effect this coming tax season, and cover 2022 transactions. But the delay pushes the start date to next year, and means that business that might’ve otherwise needed to pay quarterly taxes on digital payments this coming January won’t have to.
The IRS announcement follows public and political pushback from lawmakers, business associations, online commerce platforms, and anti-tax advocates who argued the shift would punish low income people the most and trigger needless confusion, according to a report from The New York Times.
Republican Senator Rick Scott claimed the change would amount to wholesale tracking of Americans’ financial activity and compared the policy to “Communist China” (though again, only business transactions would be subject to taxation). More likely than that though, people were set to receive a slew of paperwork with no real idea of how to complete it, and without the proper records to do so. “There has been significant confusion about this provision, and the I.R.S. needs to provide greater clarity to taxpayers as soon as possible,” Democratic Senator Ron Wyden said in a statement to the Times.
Apparently after deliberation, the IRS agrees with Wyden. The agency “heard a number of concerns regarding the timeline of implementation of these changes,” said acting IRS commissioner Doug O’Donnell in the press statement. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and the industry, the IRS will delay implementation,” he added.
However, even with the delay, businesses reliant on digital transactions will still need to be mindful of payments and ensure they’re keeping thorough records. Because transactions exceeding $600 in 2023 will be subject to the tax code change, barring any further adjustments. Once in effect, the policy is estimated to raise about $8 billion in tax revenue over the course of ten years.
PayPal, Venmo, and other cash app users who depend on digital payment platforms for business transactions can breathe a temporary sigh of relief. The Internal Revenue Service has delayed the implementation of a tax code change that would’ve mandated declaration of any exchanges over $600 by one full year, according to a Friday news release.
Currently, payments through apps and sites like Venmo, Etsy, StubHub, and Airbnb trigger the mandatory issue of a 1099-K form to a business user if their account accrues at least 200 transactions totaling $20,000 or more in a year. However, a tax tweak passed in 2021 as part of the American Rescue Plan lowers that threshold to just $600.
The shift was supposed to go into effect this coming tax season, and cover 2022 transactions. But the delay pushes the start date to next year, and means that business that might’ve otherwise needed to pay quarterly taxes on digital payments this coming January won’t have to.
The IRS announcement follows public and political pushback from lawmakers, business associations, online commerce platforms, and anti-tax advocates who argued the shift would punish low income people the most and trigger needless confusion, according to a report from The New York Times.
Republican Senator Rick Scott claimed the change would amount to wholesale tracking of Americans’ financial activity and compared the policy to “Communist China” (though again, only business transactions would be subject to taxation). More likely than that though, people were set to receive a slew of paperwork with no real idea of how to complete it, and without the proper records to do so. “There has been significant confusion about this provision, and the I.R.S. needs to provide greater clarity to taxpayers as soon as possible,” Democratic Senator Ron Wyden said in a statement to the Times.
Apparently after deliberation, the IRS agrees with Wyden. The agency “heard a number of concerns regarding the timeline of implementation of these changes,” said acting IRS commissioner Doug O’Donnell in the press statement. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and the industry, the IRS will delay implementation,” he added.
However, even with the delay, businesses reliant on digital transactions will still need to be mindful of payments and ensure they’re keeping thorough records. Because transactions exceeding $600 in 2023 will be subject to the tax code change, barring any further adjustments. Once in effect, the policy is estimated to raise about $8 billion in tax revenue over the course of ten years.