The IRS stated on January 13 that it will postpone the implementation of a new regulation that would have reduced the tax reporting threshold for transactions made by businesses using third-party payment systems such as Venmo and Cash App.
In a press release, the revenue service for the United States federal government said it elected to postpone the lowering of the threshold to $600 due to concerns raised by the agency and the Treasury Department regarding the timeline of implementation of these changes under the American Rescue Plan.
In that same release, Acting IRS Commissioner Doug O’Donnell spoke about how that decision was made in order to “help smooth the transition and ensure clarity for taxpayers, tax professionals and industry.”
IRS Giving More Time For Tax Filing Season
The extra time will assist to prevent any confusions during the next 2023 tax filing season and provide taxpayers more time to prepare for and comprehend the new reporting obligations.
The provision was supposed to take effect on January 1, 2023, but the IRS said that it will be delayed and that calendar year 2022 will be a “transition period” for the new implementation on the upcoming tax season.
According to the announcement, the new barrier will not be implemented until transactions occur after 2022. As stated by the government, the delay is designed to permit a “orderly transition” for compliance from third-party businesses and people.
The American Rescue Plan
The American Rescue Plan of 2021 is a $1.9 trillion stimulus package proposed by President Joe Biden to address the ongoing COVID-19 pandemic and its economic impact.
The plan includes provisions for direct payments to individuals, enhanced unemployment benefits, funding for small businesses, and funding for vaccine distribution and testing.
Additionally, the plan includes provisions for state and local government relief, rental and utility assistance, and funding for schools and child care. The package was passed by Congress and signed into law by President Biden on March 11, 2021.
The American Rescue Plan of 2021 altered the TPSO reporting level. The reduced barrier for commercial transactions is $600 per year, down from the prior threshold of more than 200 transactions per year in excess of $20,000 in total.
