- Employees who earned more than $600 from apps were required to report it to the IRS
- But officials confirmed that the new rules for this tax season have been postponed
- Comes amid widespread Republican opposition to sweeping changes
A sweeping rule change to taxes on income generated through payment apps such as PayPal and Venmo has been postponed, officials confirmed.
App users who made $600 or more selling goods and services were told to report it to the Internal Revenue Service (IRS) under a new threshold under the American Rescue Plan passed in March 2021.
But the IRS confirmed Tuesday that the new rules won’t take effect until after the upcoming tax filing season.
The tax reporting rule proved controversial when it was first introduced and received no Republican votes as it was passed by Congress. It would have resulted in the IRS sending out 44 million additional tax forms – called 1099-Ks – in January.
For 2024, the basic reporting threshold will increase from $600 to $5,000, the IRS said.
A major rule change to taxes on income generated through payment apps like PayPal and Venmo has been postponed, IRS officials confirmed
Before that provision – and now for this year – the reporting requirement applied only to sales of goods and services to taxpayers who received more than $20,000 and completed more than 200 transactions.
The law mainly affects gig economy workers, such as hairdressers, taxi drivers and delivery people, who can receive tips through such apps.
IRS officials say one reason for the delay is taxpayer confusion about what types of transactions can be reported.
For example, peer-to-peer transactions, such as selling a sofa or car, sending rent to a roommate and buying concert tickets, would not have to be reported, while other purchases would apply.
“This phased approach is the right thing to do for tax administration, and it avoids unnecessary confusion,” said IRS Commissioner Danny Werfel.
“It is clear that an additional deferment for tax year 2023 will prevent problems for taxpayers, tax professionals and others in this area.”
The law mainly affects gig economy workers, such as hairdressers, taxi drivers and delivery people, who can receive tips through such apps
IRS officials say one reason for the delay is taxpayer confusion about what types of transactions can be reported
This new requirement was also postponed last year.
A provision in the American Rescue Plan requires users to report transactions through payment apps, including Venmo, Cash App and others, for goods and services that total $600 or more in a calendar year.
Lawmakers across the aisle celebrated the delay.
Democratic Senator Jon Tester of Montana, who sent a letter to the IRS last week calling for a delay in the reporting requirement, said: “I am pleased to see that the IRS has heard my concerns and I will continue to fight against burdensome bureaucratic hassles. policy.’
Republican Rep. Jason Smith of Missouri said the delay shows a flaw in the provision in the American Rescue Plan, which was passed along party lines. “Given that even Democrats now admit this law is unworkable and are trying to rewrite a key provision, it’s time to scrap it and start over,” Smith said.