In a late breaking release, the IRS published Notice 2023-10 which provides updated guidance for 1099-K reporting. Addressing concerns about the timeline of implementing the changes to Section 6050W through the American Rescue Plan Act and noting the potential for personal transactions to be unintentionally included, the IRS states in Notice 2023-10 that calendar year 2022 will be regarded as a transitional period for enforcement and administration of the updated reporting threshold, which required third-party service organizations (TPSOs) to report aggregate payments of $600 or more.
Instead, the IRS through Notice 2023-10 will revert back to the previous reporting threshold for TPSOs, which requires gross amounts of aggregate payments reported to exceed $20,000, and the number of transactions to exceed 200. This will apply to tax year 2022 reporting, and the updated threshold of $600 or more will apply to returns generated for tax year 2023 and beyond. Further, the IRS will not apply penalties under Sections 6721 and 6722 against TPSOs who fail to file or furnish form 1099-K unless that failure relates to aggregate payments that exceed $20,000 along with an excess of 200 transactions.
There are two other important elements of Notice 2023-10 that must not be ignored. First, with respect to requirements of Section 6050W that were not modified by Section 9674(a) of the American Rescue Plan Act, the IRS will not view calendar year 2022 as a transitional period. Second, those payers who have performed backup withholding in accordance with Section 3406(a) during calendar year 2022 must file Form 1099-K (and furnish a copy to the payee) if the total payments to and withholding from the payee exceeded $600 for the calendar year.
To review Notice 2023-10 in its entirety, click here to visit the IRS online.
