IRS delays implementation of lower $600 reporting threshold for 1099-K
November 29, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
IRS releases 2024 retirement plan limitations
November 3, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
ASC 740: Q3 2023 provision considerations
October 4, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
Industry revenue recognition white papers updated
September 29, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
FASB issues final standard on joint venture formations
September 29, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
FASB to draft final ASU on improvements to income tax disclosures
September 29, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
Is time winding down for the hourly billing model?
September 27, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
What to do if you filed an employee retention credit claim with the IRS
September 19, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
Revenue recognition for franchisors
September 15, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
Do you have questions or want to talk?
Please fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-delays-implementation-of-lower–600-reporting-threshold-for-.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Symphona is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Symphona can assist you, please contact us.
IRS halts employee retention credit processing
September 15, 2023
Executive Summary
As 2023 comes to an end and just in time for the holidays, the IRS threw a much needed ‘hail Mary’ pass to payment processors and online marketplaces that settle payments for customers by announcing yet another delay in implementation of the lower $600 form 1099-K reporting threshold for third-party settlement organizations (TPSOs). On Nov. 21, 2023, the IRS released Notice 2023-74 announcing that third-party settlement organizations (TPSOs) will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or to a payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021. Instead, according to the guidance, tax year 2023 will be another transition year during which TPSOs may continue reporting gross aggregate payments greater than $20,000 and more than 200 transactions on forms 1099-K which are due in January 2024.
- The delayed reporting effects payment processors and online marketplaces such as Venmo, Paypal, eBay, Etsy, etc.
- The 2021 Act requires these businesses to issue Form 1099-K to customers with non-personal transactions with gross amounts greater than $600, which could be difficult for payment processors to differentiate from personal transaction in some cases.
- The proposed lower threshold is expected to tremendously increase the volume of Forms 1099 filed by over 30M forms, which industry is not prepared to file and which the IRS is not currently equipped to handle/process.
- Beginning with tax year 2024, the IRS will phase in a new lower threshold of $5,000 while it works to clarify rules for implementing the new system.
IRS delays implementation of lower $600 reporting threshold for 1099-K
Phase-in approach for new 1099-K reporting requirements
The IRS has recently released Notice 2023-74 (‘the Notice’) announcing a phased-in approach for the $600 reporting threshold previously scheduled to be implemented in tax year 2023. Instead of requiring TPSOs to immediately implement the lower $600 threshold for reporting payments, the Service will instead phase in a threshold of $5,000 for reporting transactions beginning with tax year 2024. Section 6050W of the code generally requires payment settlement entities (PSEs) to file an information return for each calendar year with respect to payments made in settlement of certain reportable payment transactions.1
According to the Notice, for tax year 2023, TPSOs will continue to be required to report taxpayers with over $20,000 in gross payments and over 200 transactions. Beginning with the tax year 2024 reporting cycle, the gross payment threshold will be lowered to $5,000. The IRS has also indicated in the Notice that it will not assert penalties under section 6721 or section 6722 against TPSOs for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.
The law previously extended in December of 2021, was enacted as a part of the American Rescue Plan of 2021 and changed the reporting threshold for TPSOs. While the new threshold was not intended to track personal transactions, industry has noted that many taxpayers would not be able to differentiate which transactions are personal and which are the result of a ‘small and casual’ business.
The incremental approach allows the IRS, taxpayers and form filers time to both understand the complexities surrounding the new rule and better prepare for the reduced threshold, which is estimated to result in an increase of 30 million forms according to a previously published Government Accountability Office report. In addition to processing volumes, the reduced threshold will result in the IRS updating its annual income tax return form and schedules. A delayed approach will allow more time for TPSOs to update their systems and implement the new threshold requirement as well as to identify the appropriate recipients of these forms as was intended by Congress.
Note: The $600 reporting threshold will still apply in limited circumstances, such as for payment card transactions and for payments subject to backup withholding. As such, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
The Notice is much needed relief for TPSOs, the IRS, and recipients who are still scrambling to manage risk associated with filing, issuance, and receipt of larger volumes of returns.
1Section 6050W(b)(3) defines a TPSO as the central organization that has the contractual obligation to make payment to the participating payees of third party network transactions.
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This article was written by Aureon Herron-Hinds, Tamarah Francois-Peek and originally appeared on 2023-11-29.
2022 RSM US LLP. All rights reserved.
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