Posts Tagged ‘1099-K’

IRS Announces One-Year Delay in $600 1099-K Requirement

Tuesday, November 21st, 2023

The IRS announced today a one-year delay in the $600 1099-K threshold.  Additionally, the IRS announced that they will phase-in the requirements with a $5,000 threshold for the 2024 tax year.  While the IRS phrased the announcement as resulting from “…feedback from taxpayers, tax professionals and payment processors…,” I strongly believe that the IRS isn’t ready for the tsunami of 1099-K’s that are coming.

In any case, we have a delay for one year, with a $5,000 threshold for next year (2024 1099-K’s filed in 2025) and a $600 threshold for the 2025 tax year (1099-K’s filed in 2026).

IRS Delays New $600 1099-K and Cryptocurrency Trading Reporting

Friday, December 23rd, 2022

Two big announcements from the IRS today will have a major impact on 2022 tax returns (returns filed in 2023).  First, the IRS announced a delay in implementing the $600 reporting for third-party payment platforms (Form 1099-K).  Quoting from the announcement:

“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.”

I’ll change the verbiage to reality: The IRS is currently in no position to handle the flood of 1099-K’s that would come in, and this transition guidance gives them a year to (hopefully) get ready and smooth out a whole bunch of wrinkles.  Do note that if you have a side business, income from that business is taxable (that’s been the law and nothing has changed).

Second, the IRS announced that brokers are not required to report additional information regarding disposals of digital assets (aka cryptocurrency) until final regulations are issued.  This does not impact taxpayers’ responsibility to both report all dispositions nor answer the question regarding cryptocurrency that appears at the top of Form 1040.  Announcement 2023-02 notes that the IRS plans to issue regulations with a notice of proposed rulemaking.

A notice of proposed rulemaking will be published that sets forth proposed regulatory text, explains the proposed rules, solicits public comments, and announces a public hearing. This process will allow the Treasury Department and the IRS to accept comments from affected taxpayers, industries, and other interested parties and enable the public to meaningfully participate in the regulatory process. After careful consideration of all public comments received and all testimony at the public hearing, final regulations will be published.

Depending on when the notice of proposed rulemaking is issued, this could delay the new rules until either the 2024 or 2025 Tax Seasons (2023 or 2024 tax returns).

Overall, this is good news for taxpayers, tax professionals, and the IRS.  The IRS still has ~12 million returns to be processed, and computer systems that are older than I am.  Had the IRS received the flood of 1099-K’s and issued notices when taxpayers properly don’t include erroneous items on their returns, the IRS wouldn’t have been able to handle the volume of correspondence.  Putting this off a year makes it at least possible the IRS will be ready.

Good Riddance: Reconciliation of Credit Card Deposits on Tax Returns Won’t Happen

Thursday, February 9th, 2012

As I noted last week, the problem of entering 1099-K’s for recipients of those forms was deferred until 2012. It turns out that the IRS acquiesced to complaints from tax professional and other groups, including the Retail Industry Leaders Association (RILA). In a letter to the RILA, Steven Miller, Deputy Commissioner of the IRS stated,

This is to confirm what I stated in our recent meeting with your organization and other industry representatives. There will be no reconciliation [of Form 1099-K’s] required on the 2012 form, nor do we intend to require reconciliation in future years. Our intention is that the reporting of gross receipts and sales on the 2012 income tax forms will be modeled on the 2010 income tax forms. No other changes to these forms related to payment card reporting are contemplated.

So which recipients of Form 1099-K’s need to be concerned? Well, you do need to be reporting your credit card receipts on your tax returns. If you’re not, and you’re audited, you can be certain the IRS will look at the 1099-K’s and ask the obvious questions.

Overall, this is great news for everyone. The problems with reconciling accounting systems designed for multiple types of payments to tax forms would have given everyone involved gray hair. This is no longer a problem deferred: It’s one less needless complexity to deal with.

Hat Tip: RILA

A Problem Deferred: 1099-K’s

Friday, February 3rd, 2012

This year sees the introduction of Form 1099-K. This form reports merchant and third-party payments you’ve received. We were supposed to note these on separate lines on our tax returns, but not any longer:

For tax year 2011 the IRS has deferred the requirement to separately report the amount of merchant card and third party network payments from Form 1099-K on your tax return. Instead, you should report all gross receipts of your trade or business as usual on the line indicated….

While I took this from a notice regarding Form 1040s, the same holds true for all tax returns. Everyone ignores the 1099-K’s…but the credit card and merchant service companies must continue to send them.

Last year I participated in a roundtable at my professional society regarding the 1099-K. The problems we foresaw were numerous; two of the most obvious were that accounting software normally tracks by product or type of product sold, and not by payment type and the issue of fiscal years (the 1099-K’s will all be on calendar years so the forms will be wrong for fiscal year clients). We found numerous other issues, and it appears the IRS realized that the 1099-K is not yet ready for prime time.

Still, it’s just a problem that’s been deferred until next year.