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IRS Again Delays $600 Reporting Requirement for Venmo Payments, Crowdfunding

By John Manganaro

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The Internal Revenue Service announced Tuesday that it is once again delaying implementation of its new $600 Form 1099-K reporting threshold for third-party platform payments beyond the 2023 tax year.

In addition to the delay for 2023, the IRS says it will install an interim reporting threshold of $5,000 for 2024 in order to help “phase in implementation” of the eventual $600 limit, which was originally set for enforcement as early as 2022.

The news will affect the millions of individual Americans and small-business owners who regularly use peer-to-peer digital apps such as Venmo, Zelle, PayPal and others to directly send and receive money in both a personal and commercial context.

Under the American Rescue Plan Act of 2021, such payment apps are now required to report transactions for goods and services in excess of $600 to the IRS. This new flow of payment information, experts have warned, will not necessarily increase most people’s tax burden, but it could potentially raise the scrutiny of tax officials if large volumes of otherwise-unreported transactions are found to be flowing between businesses and consumers.

Prior to adoption of the ARA legislation, the IRS reporting threshold was $20,000 and 200 or more transactions.

The specific terms of the new delay are contained in IRS Notice 2023-74.

According to an IRS statement announcing the delay, this action is expected to 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.”

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,” the IRS says. “Delaying changes to tax year 2024 allows for additional feedback.”

Commenting on the new notice, IRS Commissioner Danny Werfel says 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.”

Under the new ruleset, 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.

According to Werfel’s statement, the 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.

Credit: Bloomberg 

John Manganaro

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