Tax reporting rules for payment apps are deferred. Platforms like eBay and Etsy objected

The deferment means businesses won’t have to report more than $600 in revenue on payment apps until next year.

Also, the current threshold for reporting income on the 1099-K form remains $20,000 for another year. This threshold also requires the vendor to receive more than 200 payments on the payment app.

America’s 2021 relief plan, aimed at alleviating the financial and economic crisis of COVID-19, included a lower threshold.

While many of the plans included grants and loans to struggling businesses, they also tightened tax filing requirements for online commerce.
Payment apps have grown in popularity over the past decade due to their ease of use. Their “touchless” nature has no doubt boosted them during COVID.

Payment apps allow payers to send money to recipients using a phone app. This app is usually connected to the user’s bank or credit card account.

The change comes as a surprise to tax filers who have only recently studied how the new reporting thresholds, which have been postponed until next year, will be handled. Joel Blumenthal, his H&R Block registered agent and tax advisor in Troy, said:

However, on December 23, 2022, the IRS postponed the rule, stating that 2023 will be the transition year.

The rule has also caused confusion among payment app users who have heard about it.

For clarity, completing a 1099-K form does not imply that you are tax owed, it simply states your income.

One widely used example is that of a person who bought a sofa for $2,000 and sold it for $1,500 a year later. Under the new threshold, that $1,500 of her would have to be reported, but would also be considered a taxable loss rather than a gain.

Companies that operate payment apps such as PayPal and Venmo (PayPal owns Venmo) also emphasize that reporting requirements are for goods and services, not personal payments.

For example, reporting requirements shouldn’t include situations where you refund a friend who put a dinner tab on their credit card, and everyone else tips the primary payer via the app.