IRS announces delay in Form 1099-K reporting threshold for third-party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation
Taking this phased-in approach is the right thing to do for the purpose of tax administration.
IR-2023-221, Nov. 21, 2023
WASHINGTON — Following feedback from taxpayers, tax professionals and payment processors and to
reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74 announcing a
delay of the new $600 Form 1099-K reporting threshold for third-party settlement organizations for
calendar year 2023.
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. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has
more than 200 transactions in 2023.
Given the complexity of the new provision, the large number of individual taxpayers affected and the need
for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for
tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the
American Rescue Plan (ARP).
Following feedback from the tax community, the IRS is also looking to make updates to the Form 1040
and related schedules for 2024 that would make the reporting process easier for taxpayers. Changes to
the Form 1040 series – the core tax form for more than 150 million taxpayers – are complex and take
time; delaying changes to tax year 2024 allows for additional feedback.
“We spent many months gathering feedback from third-party groups and others, and it became
increasingly clear we need additional time to effectively implement the new reporting requirements,” said
IRS Commissioner Danny Werfel. “Taking this phased-in approach is the right thing to do for the
purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes
to the Form 1040. It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers,
tax professionals and others in this area.”
The ARP required third party settlement organizations (TPSOs), which include popular payment apps and
online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form
1099-K starting in 2022. These forms would go to the IRS and to taxpayers and would help taxpayers fill
out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and
services involving more than 200 transactions per year totaling over $20,000.
The IRS temporarily delayed the new requirement last year.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing
the cost of a car ride or meal, or paying a family member or another for a household bill. These payments
are not taxable and should not be reported on Form 1099-K.
However, the casual sale of goods and services, including selling used personal items like clothing,
furniture and other household items for a loss, could generate a Form 1099-K for many people, even if
the seller has no tax liability from those sales.
This complexity in distinguishing between these types of transactions factored into the IRS decision to
delay the reporting requirements an additional year and to plan for a threshold of $5,000 for 2024 in order
to phase in implementation. The IRS invites feedback on the threshold of $5,000 for tax year 2024 and
other elements of the reporting requirement, including how best to focus reporting on taxable
transactions.
“The IRS will use this additional time to continue carefully crafting a way forward to minimize burden,”
Werfel said. “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. This is consistent with our
Strategic Operating Plan. The IRS is focused on meeting taxpayers where they are and helping them get
it right the first time.”
Expanded information reporting, which will occur as the result of the change in thresholds for Form 1099-
K, is important because it increases tax compliance and can reduce burden on taxpayers seeking to
follow the law. The IRS believes that expansion must be managed carefully to help ensure that Forms
1099-K are issued only to taxpayers who should receive them. In addition, it's important that taxpayers
understand what to do as a result of this reporting, and that tax professionals and software providers have
the information they need to assist taxpayers.
The IRS will continue to provide information on IRS.gov/1099K.
