The Internal Revenue Service extended its transition relief Tuesday for the new Form 1099-K information reporting threshold, setting it at $5,000 for 2024 and $2,500 in 2025 before reaching the statutory level of $600 in 2026 and thereafter.
The threshold applies to payment apps and online marketplaces such as Venmo, PayPal, eBay, Etsy, StubHub, Airbnb and more, also known as third-party settlement organizations. The American Rescue Plan Act of 2021 lowered the old threshold from $20,000 and 200 transactions per year to $600 as a way of collecting more taxes from people and businesses who receive payment through these third parties.
Under the guidance issued Tuesday, third-party settlement organizations will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after. Notice 2024-85 also says that for calendar year 2024, that the IRS will not assert penalties under section 6651 or 6656 for a TPSO's failure to withhold and pay backup withholding tax during the calendar year.