The Internal Revenue Service (IRS) has announced that it will be delaying the implementation of the new $600 rule for third-party settlement organizations (TPSOs) for calendar year 2023.
TSOPs include popular platforms like Venmo, Paypal, and Cash App, which millions of Americans use.
Any taxpayer with aggregate transfers designated as "goods or services" that meet or exceed the $600 threshold would receive a form 1099-K from the TSOP detailing the total amount received for the year (and also a breakdown per month).
The "goods and services" distinction is very important. Generally, unless you are a business owner with a "business" account on a TSOP, your transfers are not defaulted as "goods or services".
The various news stories and articles about the $600 rule are misleading people because I get many questions from clients and friends about it. The majority of the time, they have nothing to worry about because they do not have business accounts, and all the transfers they make are not designated as "goods or services".
When 2024 rolls around we will be on the lookout for guidance from the IRS on how to handle reporting when it comes to 1099-K's under the $600 rule. It is speculated that they will create new mechanisms on tax forms to make reporting easier if the transfers are personal in nature and should not be considered income.
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Disclaimer: The information provided on this blog is for informational purposes only and does not constitute written tax advice. Please consult with your own qualified tax advisor for specific advice regarding your individual circumstances.