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Digital entrepreneurs, freelancers and small business owners everywhere are likely to be pleased to hear that the IRS is pausing implementation of a rule change that would require payment processing platforms to issue 1099 forms for transactions totaling more than $600. , including tips, are considered taxable business transactions under the law.
Previously, the IRS only issued 1099-K forms if a business recorded 200 transactions totaling $20,000 in a year.
CNN quoted IRS Commissioner Doug O’Donnell on the delay, saying that “the IRS and the Treasury Department had heard some concerns about the timeline of implementing these changes under the US bailout.” O’Donnell said the IRS wants to help ease the transition, and “additional time will help reduce confusion during the upcoming 2023 tax filing season and give taxpayers more time to prepare and understand the new reporting requirements.”
Ideally, small business owners and independent contractors now have more time to understand the new reporting requirements and ensure they are ready to get started.
CNN notes that the rule, when it goes into effect, will not result in additional taxation and will not affect in-person Venmo transactions, such as splitting the check at a restaurant. However, the 1099-K report is expected to effectively reduce tax evasion.