IRS Delays $600 Tax Rule For Venmo, eBay Sellers

The Internal Revenue Service (IRS) has just issued a reprieve for anyone who gets paid for their goods and services via e-commerce apps like Venmo, PayPal, or CashApp.

The move means if you were paid more than $600 on platforms including Etsy, eBay, and Airbnb for goods and services this year, you won’t have to fill in and submit a 1099-K tax form until spring 2024, Bloomberg reports(Opens in a new window). 

Congress reduced the tax reporting threshold for business transactions to $600 from $20,000 in 2021, but after concerns from some lawmakers, the electronic transactions industry, and the tax community, the IRS announced it would delay chasing taxes until 2024.

“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 statement Friday.

The new reporting requirements would have seen payment apps like Venmo, and CashApp be required to send 1099-K forms to taxpayers with more than $600 in business transactions this year. The requirement, which was included in the 2021 American Rescue Plan Act, has drawn criticism for impacting harshly on gig workers who sell second-hand items on eBay to supplement their low incomes and support themselves.

While the law does not affect personal transactions such as reimbursing friends and family for the theatre or a meal or paying a bill to a household member, critics argue that IRS forms could be sent to people for payments that don’t qualify for being taxed.

In a bid to alleviate some concerns, some House Democrats introduced legislation to raise the tax threshold(Opens in a new window) to $5,000 earlier this year. And earlier this year a bipartisan attempt by Republican and Democratic Senators to increase the threshold(Opens in a new window) further to $10,000 failed. 

Democratic Senator Joe Manchin, among those who pressed for a delay, said in a statement(Opens in a new window), “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. This will allow Congress more time to correct this regulation that puts undue burden on our small businesses.”