IRS updates frequently asked questions about Form 1099-K
The Internal Revenue Service today updated frequently asked questions (FAQs) for Form 1099-K, Payment Card and Third Party Network Transactions, in Fact Sheet 2022-41. The updates include:
- Definitions
- General information
- Individuals
IRS Delays Implementation of Lower $600 1099-K Reporting threshold for 2022
The Internal Revenue Service today announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season.
As a result of this delay, third-party settlement organizations are not required to report tax year 2022 transactions on a Form 1099-K to the IRS or the recipient for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.
The IRS released guidance today outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) including Venmo, PayPal and CashApp that would have generated Form 1099-Ks for taxpayers.
IRS Releases Updated Tax Gap Estimates
The IRS released a new set of tax gap estimates on tax years 2014 through 2016 showing the estimated gross tax gap increased to $496 billion, a rise of more than $58 billion from the prior estimate.
Underreporting income remains the main contributor to the gap at nearly $400 billion of the $496 billion total. Income from digital assets and crypto currency are identified as areas of noncompliance. The IRS uses this information to direct its compliance resources.
Click here to read the IRS information page.
The full 36-page report can be found here.
Beneficial Ownership Reporting Requirement on the Horizon
The Financial Crimes Enforcement Network, a department of the U.S. Treasury, recently published a new reporting requirement for certain businesses beginning in 2024. Certain businesses will be required to report beneficial owners of the company. These include not only the officers and owners of companies, but also individuals that are able to exercise substantial influence over major decisions. A fact sheet is available here.
Recent Report Highlights IRS Hiring Challenges, Antiquated Equipment and Inefficient Practices…Expect Processing Delays
The IRS is not immune to the current staffing challenges facing the country. In a recent report, the Treasury Inspector General found that these problems caused the IRS to face an unprecedented backlog of unprocessed tax returns heading into the 2021 filing season. The IRS usually carries over approximately 1 million returns into the new filing season; that number is closer to 24 million for the current season according to a recent report by the Taxpayer Advocate. Continued processing delays are expected while the IRS and Congress work to resolve these concerns.
Congress Concerned by IRS Delays
Nearly 10 million tax returns remain unprocessed by the IRS as of early December 2021. This is worrying members of Congress who say the delays are “causing significant and unnecessary burdens for families and small businesses who can’t get answers from the IRS about why their tax returns have not been processed. The IRS is in danger of falling into a vicious backlog cycle that will harm millions of taxpayers.”. Members of Congress requested answers to various questions including what is the IRS’s plan to process these backlogged returns before the next filing season, what steps are they taking to avoid this issue in the future, and their general hiring plans. The letter can be read here.
