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  • Writer's pictureFirenzeCapitalAdvisors

Third-party payment processors and recipients get extra year of relief

The IRS announced November 21 that it will extend for one additional year the transition relief from the enforcement of the more stringent information reporting requirements for third-party payment processors that were enacted in 2021.

The American Rescue Plan Act of 2021 (P.L. 117-2) reduced the dollar-threshold triggering the Form 1099-K reporting requirement from $20,000 to $600 and eliminated the 200-transaction threshold, effective for reporting for returns filed for calendar years after 2021. A number of lawmakers in both parties tried—without success—to include a provision delaying the implementation of the stricter reporting thresholds in the omnibus tax-and-spending legislation that Congress approved in December of 2022; however, the IRS late last year issued Notice 2023-10, in which it delayed enforcement of the new rules until after 2023.

Notice 2023-74

In its latest round of administrative relief, Notice 2023-74, the IRS indicated that it will treat calendar year 2023 as an additional transition period with respect to enforcing the new 1099-K reporting requirements. The agency explained in a November 21 news release issued in conjunction with the notice that its decision to further delay implementing the American Rescue Plan provision was based on “feedback from taxpayers, tax professionals, and payment processors” and its desire “to reduce taxpayer confusion.”

Phased-in dollar threshold possible for tax year 2024: The IRS also announced in that news release that it intends to phase-in the implementation of the stricter rules enacted in the American Rescue Plan by setting the dollar-threshold triggering the reporting requirement at $5,000 (instead of $600) for tax year 2024.

“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,” IRS Commissioner Danny Werfel explained in the release. “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.”

In the release, the IRS requested comments from stakeholders on the planned $5,000 threshold for tax year 2024 and on “other elements of the reporting requirement, including how best to focus reporting on taxable transactions.”

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