The Internal Revenue Service is delaying a requirement for ecommerce platforms to send tax forms to customers who have transactions of more than $600. Those platforms include Venmo, PayPal, Cash App and Etsy.

The one-year delay is a reprieve for individuals who use those digital payment platforms to conduct business. Congress reduced the tax reporting threshold to $600 from $20,000 in 2021. It would have affected people filing tax returns in the spring of next year.

The IRS said it will use the coming year to transition to the new requirement and that more information would be available soon.

“The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” acting IRS commissioner Douglas O’Donnell said in a Dec. 23 statement.

Representatives of PayPal Holdings Inc. and Block Inc. didn’t immediately respond to requests for comment. PayPal owns Venmo, and Block owns Cash App.

IRS transitions to new requirement

The 2021 pandemic aid legislation known as the American Rescue Plan Act included the requirement for third-party payment processors to send 1099-K forms to taxpayers with more than $600 in business transactions, with no minimum number of transactions required. Previously, the law had the higher dollar threshold as well as a minimum of more than 200 transactions.

The IRS said the law isn’t intended to track personal transactions, such as reimbursing a friend or family member for a meal or gift, or for paying a household member for a bill. However, the difficulty of delineating personal and business transactions has caused critics of the proposal to say that it could result in people receiving IRS forms for payments on which they don’t owe taxes.

Online marketplaces such as eBay Inc. also pushed for the IRS to increase the $600 threshold. They argue that the lower threshold will cause confusion for taxpayers who sold used goods online for less than the original purchase price.

The delay comes after pleas from Congress. Lawmakers expressed interest in raising or delaying the $600 threshold, but they were unable to include that change in the year’s spending bill.

“I am pleased the Treasury Department and the IRS listened to my request to delay the 1099-K reporting requirement that will harm small businesses and individuals who sell goods online across America,” Senator Joe Manchin, a West Virginia Democrat who pressed for a delay, said in a statement. “This will allow Congress more time to correct this regulation that puts undue burden on our small businesses.”

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