STATEN ISLAND, N.Y. — People receiving payments for goods and services through third-party services, like Venmo, Zelle and PayPal, will have at least two years before they need to abide by a new onerous threshold.
Under the American Rescue Plan of 2021, taxpayers would need to report payments for goods and services over $600 received through those third-party services through the Internal Revenue Service’s (IRS) 1099-K forms — down from a previous threshold of $20,000 and 200 transactions in a given tax year.
The IRS announced in November that the prior threshold would remain in place for another year this upcoming tax season and would only be lowered to $5,000 for the 2024 tax year.
The agency cited feedback from taxpayers, tax professionals, and payment processors and a desire to reduce taxpayer confusion as reason for the delay. However, companies operating those services could still send a 1099-K form, according to the IRS.
Typically, 1099-K forms are for people who use third-party apps to conduct business, but could also include casual sellers who sold personal items, like clothing, furniture and other household items, that they paid more than they sold it for.
If taxpayers sold items at a loss, meaning they paid more for the items than they sold them for, they’ll be able to zero out the payment on their tax return by reporting both the payment and an offsetting adjustment on a Form 1040, Schedule 1.
Reporting is not required for 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, according to the IRS.
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