Lower Form 1099-K threshold delayed again

The IRS again delayed the effective date of the $600 threshold for Form 1099-K reporting for third-party settlement organizations and will treat 2023 as another transition year, the Service said Tuesday in Notice 2023-74.

When the IRS starts implementing the new threshold, enacted by the American Rescue Plan Act (ARPA) of 2021, P.L. 117-2, it is planning to phase it in, starting with a $5,000 reporting threshold for tax year 2024.

The IRS estimated that it would receive 44 million Forms 1099-K, Payment Card and Third Party Network Transactions, under the $600 threshold, almost three times the 14 million it now receives.

Until ARPA was enacted, third-party settlement organizations were allowed a de minimis exception to filing Form 1099-K with respect to payees with 200 or fewer such transactions during the calendar year with an aggregate gross amount of $20,000 or less. ARPA amended this de minimis amount to $600, with no minimum number of transactions, effective for calendar years beginning after Dec. 31, 2021.

In December 2022, the IRS delayed that effective date by a year. And for 2023, reporting again will not be required unless the taxpayer receives over $20,000 and has over 200 transactions in 2023.

Third-party settlement organizations generally include banks and other organizations that process credit card transactions on behalf of a merchant and make an interbank transfer of funds to the merchant from a customer.  If you have questions about third-party settlement arrangements, including Form 1099-K reporting requirements, please contact a ShindelRock tax professional.