Attention Taxpayers! The IRS Delayed the Implementation of New 1099-K Reporting Threshold
Just ahead of Thanksgiving, the IRS has dropped a major announcement. This will significantly impact 1099-K reporting for 2024.
In this blog, we will be discussing this brand-new update and how it may impact you and your business, as well as your future tax filings!
Form 1099-K Reporting Threshold for the 2023 Tax Year
Over the last 2 years, Form 1099-K has become a tax form that raises many questions among taxpayers, with the IRS making some significant changes to its filing requirements.
Yesterday, November 21, 2023, the IRS made yet another announcement regarding the filing requirements of 1099-K for the 2023 tax year. Here is the summary of this announcement:
- The IRS has extended the transition period for the third-party payment settlement entities and payment card companies to adapt to the new 1099-K reporting threshold ($600).
- For the 2023 tax year, the reporting threshold for 1099-K will remain at $20,000 and 200+ transactions.
- As part of the phase-in, the IRS also plans for a reporting threshold of $5000 for the 2024 tax year.
It’s our understanding that the IRS has made this announcement as a result of collective feedback received from taxpayers and tax professionals regarding the confusion surrounding 1099-K reporting requirements.
Changes Made to Form 1099-K – A Recap
Until March 2021, the 1099-K Form wasn’t a commonly filed tax return by businesses. The threshold for filing 1099-K was $20,000 and 200+ transactions. But then, the IRS made this series of announcements:
- March 2021 – It all started with the American Rescue Plan Act of 2021. The IRS has reduced the 1099-K threshold to $600. At that time, it meant that the businesses would need to file this form more often than they used to.
- December 2022 – Considering the complexities that the businesses had in understanding the 1099-K filing requirements, the IRS has announced that the implementation of the new threshold will be postponed to the 2023 tax year, and the 2022 tax year will be treated as a transition phase.
- November 2023 – The IRS has yet again postponed the implementation of a new threshold and announced that the 2024 tax year may have a threshold of $5000.
What Businesses Should Do Now?
With this announcement, businesses can now go back to the way they have been using 1099-K Forms previously. They only need to file this when they pass the original threshold ($20,000) and 200+ transactions.
No matter what the threshold is, TaxBandits is here to simplify the 1099-K e-filing for the 2023 tax year. If you are a software provider or a bulk filer, you can enable seamless 1099 automation with TaxBandits API.
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