Month: January 2023

New 1099-K Requirements Delayed

The IRS has announced a delay in reporting thresholds for third-party settlement organizations that was scheduled to take effect for the upcoming tax filing season.

As a result of this delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or to the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.

As part of this, the IRS released guidance outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) that would have generated Form 1099-Ks for taxpayers.

The American Rescue Plan of 2021 changed the reporting threshold for TPSOs. The new threshold for business transactions is $600 per year; changed from the previous threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000. Under the law, beginning January 1, 2023, a TPSO would have been required to report third-party network transactions paid in 2022 with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. TPSOs report these transactions by providing individual payee’s an IRS Form 1099-K.

The newly announced transition period delays the reporting of transactions in excess of $600 to transactions that occur after calendar year 2022. The transition period is intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting. A participating payee, in the case of a third-party network transaction, is any person who accepts payment from a third-party settlement organization for a business transaction.

The IRS also noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.

What’s New in 2023

As I’m sure you know, Congress seems to make changes to tax laws just about every year. This year was no exception, so here are a few things related to taxes that you should be aware of as we head into 2023.

Some tax credits return to 2019 levels

Some tax credits that were adjusted in recent years are scheduled to return to 2019 levels. This means that you might receive a smaller refund compared to recent tax years. Changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit.

  • If you got $3,600 per dependent in 2021 for the CTC, you will (if you’re eligible) get $2,000 for the 2022 tax year.
  • For the EITC, if you have no children and received roughly $1,500 in 2021, you will now get $500 in 2022.
  • The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.

No above-the-line charitable deductions

In recent years, you could take up to a $600 charitable donation tax deduction on your tax return, due to Coronavirus relief passed by Congress. However, in 2022, you may not take an above-the-line deduction for charitable donations if you take the standard decuction.

More people eligible for the Premium Tax Credit

In tax year 2022, you may still qualify for temporarily expanded eligibility for the premium tax credit.

Clean vehicle tax credit

If you are interested in claiming a tax credit for a plug-in electric vehicle, you should be aware that those rules may have changed, depending on when in 2022 you purchased your vehicle. Please contact our office for more information.

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