The IRS has once more postponed the implementation date for the expanded reporting requirements on Form 1099-K, as announced in Notice 2023-74.[1] Previously, the IRS had deferred the effective date of Internal Revenue Code (IRC) §6050W(e), which was initially set to commence in 2022, extending it to 2023.

Additionally, in Fact Sheet 2023-27,[2] the IRS indicated plans to implement a threshold of $5,000 for 2024 as part of phasing in the new law, though this planned threshold was not mentioned in the Notice.

History of the Revised Form 1099-K Reporting

The Notice provides the following description of the changes to IRC §6050W(e) and the Form 1099-K reporting requirements as stipulated in the American Rescue Plan Act of 2021.

Section 9674 of the ARP amended section 6050W(e) to provide that, for Forms 1099-K for calendar years beginning after December 31, 2021, a TPSO is required to report payments in settlement of third party network transactions with respect to any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions.

Notice 2023-10, 2023-3 I.R.B. 403 (January 17, 2023), delayed implementation of the reporting threshold for TPSOs in section 9674(a) of the ARP for Forms 1099-K for calendar years beginning before January 1, 2023. Notice 2023-10 also provided that the IRS would not assert penalties under section 6721 or section 6722 for TPSOs failing to file or failing to furnish Forms 1099-K unless the gross amount of aggregate payments required to be reported exceeded $20,000 and the number of transactions exceeded 200.[3]

Revised Relief for 2023 Form 1099-K Filings

In section 3 of the Notice, the IRS outlines specific relief measures for certain information reporting requirements introduced by the American Rescue Plan Act of 2021:

Calendar year 2023 will be regarded as a further transition period for purposes of IRS enforcement and administration of the information reporting requirements under section 6050W(e), as amended by the ARP. For calendar year 2023, a TPSO is not required to report payments in settlement of third party network transactions with respect to a participating payee unless (1) the gross amount of aggregate payments to be reported exceeds $20,000 and (2) the number of such transactions with that participating payee exceeds 200. The IRS will not assert penalties under section 6721 or section 6722 for a TPSO for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceed 200.[4]

However, the Notice advises that the IRS will continue to enforce all other provisions of IRC §6050W that are not affected by the American Rescue Plan Act of 2021 for the calendar year 2023:

The IRS will not regard calendar year 2023 as a transition period with respect to the requirements of section 6050W that were not modified by section 9674(a) of the ARP, such as provisions relating to payment card transactions. In addition, TPSOs that have performed backup withholding under section 3406(a) for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.[5]

Thus, those who had aggregate credit card transactions in excess of $600 will be issued a Form 1099-K.

IRS Fact Sheet Explanation of What the Notice Means

The Fact Sheet offers the following interpretation of the Notice's provisions:

This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

This phased-in approach will allow the agency to review its operational processes to better address taxpayer and stakeholder concerns.

Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount.

It’s important to note that the higher threshold does not affect the actual tax law to report income on your tax return. All income, no matter the amount, is taxable unless it’s excluded by law whether a Form 1099-K is sent or not.[6]

The Fact Sheet continues by providing information regarding how taxpayers who receive a Form 1099-K should report the information on their income tax returns.

[1] Notice 2023-74, November 21, 2023, https://www.taxnotes.com/research/federal/irs-guidance/notices/irs-extends-transition-penalty-relief-for-600-reporting-threshold/7hl17 (retrieved November 22, 2023)

[2] Fact Sheet 2023-27, FS-2023-27, November 21, 2023, https://www.taxnotes.com/research/federal/irs-guidance/fact-sheets/fact-sheet-explains-extension-of-penalty-relief-for-600-reporting/7hl19 (retrieved November 22, 2023)

[3] Notice 2023-74, November 21, 2023

[4] Notice 2023-74, November 21, 2023

[5] Notice 2023-74, November 21, 2023

[6] Fact Sheet 2023-27, FS-2023-27, November 21, 2023