Photo by Nataliya Vaitkevich:
In one of the last updates of the year, the Internal Revenue Service (IRS) announced that it was dropping the requirement to report all TPSO transactions above $600 for the year 2022. Instead, the new guidelines will now become mandatory only starting this year. The decision was made citing the difficulties experienced with transitioning to the new reporting system first introduced in 2022.
For context, third-party settlement organizations (TPSOs) were formerly required to officially report their transactions only if they totaled an aggregate amount of $20,000 in more than 200 unique transactions. That threshold was lowered to only 3% of the original amount, and now stands at only $600 per year, regardless of the number of transactions involved. The law is not intended to be applicable to personal expenses.
The new changes to the system were introduced as a part of the game-changing American Rescue Plan of 2021, also known as the COVID stimulus package. While the plan primarily focused its renewed taxation efforts on large businesses, the part on TPSO transaction reporting will hit small businesses particularly hard, and multiple micro-transaction companies are already offering services to help with filling the Form 1099-K. The change is a part of an overall effort to reinvigorate tax enforcement by the IRS to generate extra revenue. As a rule, more complete reporting can help improve outcomes in this regard.
The new move by the IRS came rather unexpectedly for many small businessowners around the country. Just in October, the IRS issued a statement reminding responsible citizens of the new reporting requirements. The requirement was later delayed on 23rd December with Notice 2023-10, which means that only TPSO transactions conducted after the year 2022 will be liable to the new rules.