IRS Punts on Form 1099-K Again
We earlier this week indicated the IRS would have a webinar on 1099-K filing. Nobody could access and now we know why.
The American Rescue Plan Act of 2021 mandated changes to the filing requirements for Form 1099-Ks to be filed after December 31, 2021. The old rules were that the provider was required to file a form if the aggregate transactions exceeded $20,000 and the total number of transactions exceeded 200.
The IRS previously deferred this requirement for one full year and today, they announced that they would defer it for another full year. For 2023 Form 1099-Ks, the requirement remains the same as in previous years.
For 2024, the IRS is dropping the $20,000 requirement down to $5,000 and it appears that they will fully implement the new $600 requirement in 2025 or later. The notice also states that updates to Form 1040 Schedules will likely result starting with the 2024 tax year. This leads us to believe that a new Schedule will be required to accurately allocate the income reported on Form 1099-K.
As an example, we believe the form will start with total amounts reported on Form 1099-K and then it will have lines for where these proceeds are reported such as Schedule C, Schedule F, etc. and then back out amounts for gifts and reimbursements between friends. Supposedly this reporting is for business transactions, but most providers are likely to issue 1099s for all transactions and let taxpayers reconcile on the return.
We personally think the IRS is having heartburn having to deal with 44 million or more 1099-Ks (their estimate of new forms) that would be required under this law, and they are probably hoping that Congress will change the law one more time.
However, we personally believe that there is more tax revenue to be raised from this 1099-K filing requirement than new taxes from the top 1%, but the cost of compliance for taxpayers and the IRS is steep. We will keep you posted.