IRS Delays $600 Threshold Changes for Form 1099-K Reporting
The IRS recently announced a delay in the implementation of the $600 threshold for Form 1099-K reporting. This rule, which would have required third-party settlement organizations (TPSOs) to report aggregate payments greater than $600, was initially set to go into effect in 2024. However, the IRS has pushed back this requirement to give businesses more time to prepare, designating 2024 and 2025 as transition years. AAFCPAs advises that clients review their current payment reporting processes to ensure readiness for the phased thresholds. The new rule is scheduled to take effect in 2026, with reporting thresholds set at $5,000 for 2024 and $2,500 for 2025. The $600 threshold will not take effect until 2026.
The Form 1099-K is a tax form used by the IRS to report certain types of payment transactions. It is typically used to track payments made to businesses or individuals through third-party payment processors or networks, such as PayPal and Venmo.
This is the third delay of the new threshold, which was originally set to take effect in 2022 under the American Rescue Plan Act of 2021 (ARPA). Before ARPA, TPSOs only needed to report payees with more than 200 transactions totaling over $20,000 in a calendar year. ARPA lowered this threshold to $600, regardless of the number of transactions.
The IRS also announced that it will not impose penalties in 2024 for TPSOs that fail to withhold and pay backup withholding tax. This delay aims to give businesses and taxpayers more time to prepare for the new requirements.
How We Help
AAFCPAs conducts thorough 1099 analyses to determine filing needs and ensure compliance with IRS regulations. We work closely with clients to identify which filings are necessary based on their unique business activities. When filings are required, we take care of the entire process—from analysis to mailing and filing—prioritizing accuracy, efficiency, and data security. Our team stays up to date with the latest tax regulations to ensure your business meets all IRS deadlines and requirements.
In addition to our comprehensive 1099 services, AAFCPAs’ Outsourced Accounting and Fractional CFO (OAFC) practice provides scalable, customized finance support tailored to each client’s specific business needs. Whether clients require assistance with day-to-day accounting, complex financial reporting, or strategic CFO-level advisory, we offer the expertise necessary to navigate tax reporting and other financial complexities. Our solutions help businesses streamline their accounting functions, reduce administrative burdens, and maintain compliance, all while providing actionable insights to improve decision-making.
If you have questions, please contact Nicholas M. Foresti, MBA, Consulting Controller at 774.512.4017 or nforesti@nullaafcpa.com, Destiny J. Flood, CPA, Partner, Commercial Outsourced Accounting & Fractional CFO at 774.512.4151 or dflood@nullaafcpa.com—or your AAFCPAs Partner.