The Internal Revenue Service has delayed a move to require taxpayers to report cash transfers that are $600 or more using third-party organizations.
The delay was announced on Friday so as to allow the 2022 tax year to serve as a transitional year for this new rule. The original announcement would have required taxpayers to report these transactions made with third-party cash-transferring applications, such as Venmo and Cash App, on Form 1099-Ks, according to a statement from the IRS.
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“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
In January, the IRS announced the new rule as a result of the American Rescue Plan. The requirement to report transfers that were at least $600, regardless of how many transfers were made, marked a drastic decrease from the previous requirement of reporting 200 or more transfers that were at least $20,000.
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Beyond this initial reason for the delay, which will allow organizations and taxpayers to become adjusted to the change, the IRS is also enacting it to make sure that 1099-Ks are only given to taxpayers who should receive them. The delay will also allow tax preparers to know how they can help taxpayers who will need to abide by this rule once it is implemented.
This will mean, however, that the current rule of reporting 200 or more transfers that are all worth $20,000 or more will continue to remain in effect.
