The IRS Delayed the $600 Reporting Rule for Freelancers: Now What?

To cap off the weird year that was 2022, the IRS actually decided to get into the holiday spirit themselves, possibly for the first time in recorded history. On December 23, 2022, the IRS announced that third party settlement organizations (TPSO’s) are not required to report transactions over $600 on a Form 1099-K to the IRS for the 2022 tax year.

The notice essentially creates a “transition period” for clients and freelancers: The updated requirements will be in effect for the 2023 tax year and the reporting deadline for 2023 1099-Ks is January 31, 2024.

Why did the IRS do this in the first place? Well, stakeholders urged the IRS to delay the implementation for a number of reasons including taxpayer confusion and lack of clear guidance. The surprising part is: the IRS listened!

"To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes,” said Acting IRS Commissioner Doug O'Donnell. “The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” he said.

In other words, the IRS was not really ready to process a whole lot of extra paperwork.

That’s ok, IRS, we get it.

Of course the original threshold will still apply. If you are a freelancer who earned at least $20,000 in payments from over 200 transactions, a 1099-K form will still be necessary.

We can expect that by 2024 the lower threshold will apply for 2023 payments, so make sure to continue to track and report your taxable income from all electronic and non-electronic sources. That is, unless 2023 turns out to be even weirder than 2022.

By Jaron Gilinsky, Founder and CEO, Storyhunter