IRS announces delay in new $600 1099-K tax reporting threshold

[sheila@ebay]

Please check out the 1099k reporting threshold announcement from December 29th, here. This announcement should cover the majority of 1099 questions.

Have more questions that aren't covered in the announcement? Please post your questions in this thread.

[msv_lanka]

good

[blingfling123]

@dbfolks166mt 

Yeah, it is.  This was not a single conversation with a single entity, it was many conversations with many entities, and their legal departments from eBay to PayPal.

The Fed rule would have (and will in the future) trump any state limit anyway so even if the loophole were there for the state, they would have been issued for the feds, and that information is communicated to the states. 

[dbfolks166mt]

@dbfolks166mt 

Yeah, it is.  This was not a single conversation with a single entity, it was many conversations with many entities, and their legal departments from eBay to PayPal.

The Fed rule would have (and will in the future) trump any state limit anyway so even if the loophole were there for the state, they would have been issued for the feds, and that information is communicated to the states. 

     Interesting. The Fed rule has not trumped the Virginia state law for the past 2 years and I don't expect it to for the 2022 tax year either. It doesn't really matter since I report the income anyway but the 1099 was/is a good check and balance against my own records. 

     Even the eBay announcement indicates they will issue the 1099's based on the state thresholds. This is turning into a real mess. 

"As a result, for tax year 2022, only eBay sellers who: 1) exceed the reporting threshold of $20,000 and 200 transactions, 2) had backup withholding applied in 2022, or 3) are residents of states that have a lower reporting threshold will receive a Form 1099-K."

[slippinjimmy]

Mess?

eBay will issue 1099K's based on the lowest of Federal or State requirements. For 2022 the matter is already done, the Federal threshold for 2022 is the same as 2021, $20,000. eBay will again issue based on the lowest threshold.

Unless the IRS postpones again or Congress amends the legislation the current Federal threshold is $600 for 2023. I foresee almost zero chance legislation amended by Congress this year and I'm not sure the IRS will bend to lobbying again.

Even if it does change one should proceed as if it won't.

[dbfolks166mt]

Mess? 

     This will be interesting to watch in 2023 given the American Rescue Plan Act purported the additional tax revenue that would be realized from lowering the issuance threshold would be used to cover things like the increases to the IRS budget and FTE increases. 

     Give the control of Congress is now divided and the way partisanship voting rules in Congress I would be surprised to see anything get passed in 2023 or 2024. Given the potential for Federal stalemate it will be interesting to see how many other states pass their own individual 1099 issuance thresholds potentially creating 50 different 1099 issuance thresholds. Software programmers for third party financial processors would love that one. Then you have to think about the seller that moves from one state to another where the issuance thresholds are potentially different.  

eBay will issue 1099K's based on the lowest of Federal or State requirements. For 2022 the matter is already done, the Federal threshold for 2022 is the same as 2021, $20,000. eBay will again issue based on the lowest threshold. Agree and that is the way I fully expect it to work for the 2022 tax year since it has been working that way in prior years for those states that already had a lower issuance threshold. 

Unless the IRS postpones again or Congress amends the legislation the current Federal threshold is $600 for 2023. I foresee almost zero chance legislation amended by Congress this year and I'm not sure the IRS will bend to lobbying again.

In late December the Senate snubbed an Omnibus bill that would have raised the Federal issuance limit, the new House membership is expected to pass it.

Even if it does change one should proceed as if it won't.

[stephenmorgan]

IRS targeted poorest taxpayers while millionaires went mostly unscathed in 2022: report

https://news.yahoo.com/irs-targeted-poorest-taxpayers-while-204115645.html?fr=sycsrp_catchall

Well, it is a lot easier and less complicated to target lower income.  A basic income matching audit is much simpler than a business audit.  Many of these audits are just a paper audit and you are not going to have a IRS Agents visit you. 

I had a paper audit once because the prior years my spouse had 5 names.  She did away with the second and third name making her fourth name her middle name.  This cause a audit because it did not match with Social Security.  I explained what she did, she then changed her Social Security Card to match and it has not been a issue since.

[wastingtime101]

---

@byronomo wrote:

 What if you never provide the SSN and they never release the $50 payment?

In this case, is your reporting requirement the $599 that you ACTUALLY received or should it include the $50 that eBay is holding?

What does eBay do with the $50 if they never release it?  Does it count as revenue for them (eBay) and thus subject to taxation for eBay?

---

If you don't provide SSN, eBay will release the funds in 6 mo to your state's unclaimed property division. You can claim it then.

You should speak with a tax professional about that $50 and whether you should report it in 2022 when you made the sale or in 2023 when you will presumably claim the funds from your state.

 @byronomo

[pburn]

---

@stephenmorgan wrote:

. . . she then changed her Social Security Card to match and it has not been a issue since.

---

Might have  been a good idea for that one to have been toward the top of the list of "Things To Do When I Change My Name."

[wildpitchsports]

Let's hope that they take this time to amend this change in 2023

[Anonymous]

I seriously doubt that this will even go through for 2023 as there won't be enough IRS agents to handle the load. It's all a big Democrat dream to get the little sellers while the rich know all the loopholes.

[slippinjimmy]

---

@Anonymous wrote:

I seriously doubt that this will even go through for 2023 as there won't be enough IRS agents to handle the load. It's all a big Democrat dream to get the little sellers while the rich know all the loopholes.

---

Do you have any idea how many BILLIONS of tax slips the IRS deals with every year? 1099 are reported by the issuer electronically no manpower required. They are assigned by the IRS to specific taxpayers, no man power required. The IRS compares the amounts declared on all tax slips to what the tax payer reports, again no manpower required. If the numbers don't match or are not within a reasonable range the IRS computers will spit out a notice to the taxpayer that they failed to report income, again no manpower required. They may at that time assess the taxpayer based on all the information they have and again no manpower required.

FYI - It's not just "little sellers" who have been evading taxes from online sales that previously were not reported. Even the $20,000 is far too high because it allows a person making 6 figure employment or investment income to supplement (tax free) their income by selling just shy of $20,000 on eBay, another just shy of $20,000 on Etsy and again on Amazon and then again on some other platform or their own website.

The "little seller" you refer to often would not even owe any additional Income Tax because their total income is fairly low.

Finally ask anyone who derives the bulk (or all) of their income from a traditional paycheck, do you think they are happy that every penny of their income is reported yet some other person gets away with not reporting any income or only reporting a small portion of their true income.

[nobody*s_perfect]

I would give that post five "Helpfuls" if I could.

[Anonymous]

actually I do know as my husband was an IRS agent and I got an earful all the time

[pburn]

---

@Anonymous wrote:

actually I do know as my husband was an IRS agent and I got an earful all the time

---

Uh-huh.

[stephenmorgan]

---

@pburn wrote:

---

@stephenmorgan wrote:

. . . she then changed her Social Security Card to match and it has not been a issue since.

---

Might have  been a good idea for that one to have been toward the top of the list of "Things To Do When I Change My Name."

---

Yep, you are absolutely correct.  That is very astute of you to notice this.  Thank you for your attention to detail. 

That was near 18 years ago and I actually stated it backwards.  It was the name change on her Social Security Account that prompted the mismatch of the name on prior IRS Tax Filings.

The statement on my prior post was only meant to demonstrate that a Paper Audit is not as complicated as other Audits.