IRS Delays $600 Reporting Threshold for Form 1099-K
In 2021, the American Rescue Plan Act (ARPA) enacted a new $600 reporting threshold for third-party settlement organizations for 2022. However, in December 2022, the IRS announced a delay in the lower reporting threshold. Accordingly, third-party settlement organizations will not have to report tax year 2022 transactions on Form 1099-K, Payment Card and Third Party Network Transactions, to the IRS or the payee for the lower threshold amount.
Third-party settlement organizations largely include banks and other organizations that process credit card transactions on behalf of a merchant and make interbank fund transfers from customers to the merchant. Form 1099-K must be provided to payees by January 31 of the year following the calendar year for which the return was made. The form must be filed with the IRS by February 28 (March 31 if filing electronically).
Before the ARPA changes, third-party settlement organizations were permitted a de minimis exception to filing Form 1099-K with respect to payees with 200 or fewer transactions during a calendar year, with an aggregate gross amount of $20,000 or less. ARPA changed the de minimis amount to $600 and eliminated the minimum number of transactions, effective December 31, 2021.
The new lowered threshold was widely criticized, and thus in Notice 2023-10, the IRS announced that 2022 will be considered a transition period for IRS enforcement and administration of the $600 exception threshold for third-party settlement organizations and network transactions. Therefore, for returns for calendar years before 2023, such organizations will not be required to report payments in settlement of third-party network transactions with respect to a payee unless the gross amount of aggregate payments exceeds $20,000 and the number of transactions with that payee exceeds 200.
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