Venmo Reporting Requirement Update
On Friday, December 23, 2022, the Internal Revenue Service “IRS” announced that they are postponing the $600 Form 1099‐K reporting requirement on business transactions made through third‐party payment platforms, such as eBay, PayPal, Venmo, and Etsy. While the IRS aimed to roll out this new law for the 2022 tax year, many critical areas require further analysis. Various organizations such as the American Institute of CPAs, the National Association of Tax Professionals, and the National Taxpayers Union all share the same question: “how will the IRS differentiate which transactions on Venmo and similar platforms are personal versus business.”
The IRS’ position on reporting 1099‐K’s before the passage of the American Rescue Plan was that a taxpayer would only be issued a 1099‐K if their third‐party network transactions exceeded $20,000 or 200 transactions. The proposed rules require this payment threshold to drop to $600, and without further guidance from the IRS, the delay is welcome; however, it will be short-lived. Despite the current delay, the lower threshold reporting requirement is still in the works and is expected to be finalized prior to the 2023 tax year reporting period. If this new law is not implemented carefully, it could create massive headaches for taxpayers and the IRS. The IRS promises to provide additional guidance in the near future, and we promise to communicate any updated guidance as soon as it is released.
Should you have any questions surrounding information reporting requirements like Form 1099‐K please do not hesitate to contact a WG advisor.
