Today the IRS announced another delay in reporting thresholds for third-party settlement organizations (TPSOs) set to take effect for the upcoming tax filing season. As a result of this delay the TPSOs will not be required to report tax year 2023 transactions on a Form 1099-K to the IRS or the payee for the lower, over $600 threshold amount enacted as part of the American Rescue Plan of 2021. Well known third-party settlement organizations (TPSOs) include Venmo and PayPal.
[blog.turbotax.intuit.com]

The IRS also announced that the threshold for issuing a 1099-K would be $5000 rather than $600. As far as I could tell, that is the threshold only for 1099-K forms. It does not change the $600 threshold for a "normal" 1099 if an MSC pays you directly.

@myst4au wrote:

The IRS also announced that the threshold for issuing a 1099-K would be $5000 rather than $600.

Indeed, but the $5000 will not start until tax year 2024 (i.e. 2025). It sounds as if they are going to grandfather the new rule in starting in 2025. By then there will have been a national election and maybe, just maybe a directive will come down to do away with the rule altogether.

I sell on a couple of online platforms, including eBay. PayPal no longer handles eBay payments, eBay does, so it looks like I will be stuck reporting my for-profit income. Of course, I am legally required to report it anyway, IRS rule or no rule.

I was thinking of selling some handbags I bought many years ago- vintage now designer bags- If I sell them on Ebay, I am not sure I can find the receipts from say 35 years ago- in fact I do not have them! so payments would be through Ebay and not Paypal? I sold things MANY years ago on Paypal and am not sure of new procedures. thanks

@SueW70 wrote:

I was thinking of selling some handbags I bought many years ago- vintage now designer bags- If I sell them on Ebay, I am not sure I can find the receipts from say 35 years ago- in fact I do not have them! so payments would be through Ebay and not Paypal? I sold things MANY years ago on Paypal and am not sure of new procedures. thanks

If you originally bought the handbags for your own personal use (which I assume you did), then you would likely sell them at a loss. I don't know what type/brand of handbags you have. While they are vintage, it does not mean you can turn a profit on them - especially when you adjust for 35-year inflation. These would be classified as a hobby, akin to a traditional yard sale. Even if you did technically make some minor profit on them, if it is only a handful, and you don't sell anything else, I don't think any red flags would be raise....especially under current rules.

Buyers can still use PayPal to pay for purchases on eBay. However, eBay collects the money automatically from PayPal, takes out any sales tax so that sellers do not have to deal with that, then takes out their fees, and then deposits what is left into your eBay account. From there, you can have the money deposited into a bank account.

I keep about 10% or less of my inventory items that I bought for personal use that I now want to sell. The remaining 90% of my inventory are things I buy with the purpose of flipping for profit. I do not want the IRS to classify what I do as a hobby because I could still end up having to pay taxes on it without the benefit of taking business deductions. So I take steps, including having a business plan, to ensure the operation runs as a business. Mystery shopping is the same way. The goal must be to make a profit if you want to legally be able to take business deductions. You don't have to turn a profit every year, but you do need to profit every few years so they don't consider it hobby income. Depending on how much you make, it would be possible to end up in a hybrid situation where the IRS says you have a hobby, not a business and cannot take business deductions, yet you've made enough income where you must pay taxes on it.

This is getting off-topic on this thread, and maybe I should start a new one, but the Department of Labor is likely going to rescind the current Independent Contractor rule and issue a new rule that would essentially prohibit companies from classifying workers as Independent Contractors. Instead, workers would have to be classified as employees. This would certainly have an impact on the mystery shopping industry, and it probably would not be good for those of us that do this type of work. It would also impact people that do gig work like Uber, GrubHub, etc.

Edited 1 time(s). Last edit at 11/24/2023 09:13PM by ServiceAward.

If mystery shoppers are classified as employees meaning companies will have to pick up SS and other incidental requirements the industry will be done with. The fees charged by the MSC to do evaluations with the added expenses related to employment would be so high that no company would be interested in payjng such high fees.

@SueW70 wrote:

If mystery shoppers are classified as employees meaning companies will have to pick up SS and other incidental requirements the industry will be done with. The fees charged by the MSC to do evaluations with the added expenses related to employment would be so high that no company would be interested in paying such high fees.

I think you are right, that it would be done with as we know it. I don't think mystery shopping would cease to exist. It is a valuable way for companies to gain insight on their employees or competitors. There may be more of a shift to doing it in house rather than through a 3rd party. I'm very concerned about the potential to change and my hope, that if it is implemented, it will be short-lived. One reason why I do this work is because I like not having a boss and I like to set my schedule, accepting what I want, and pass over what I don't want. Because I take care of my mom, I can't go out on longer routes that I might otherwise do, but I do well and between this and flipping stuff online I get by, and I am (mostly) content. I spent years in a professional industry. Before I got out of it, I was making six figures. But I was also miserable and stressed, battling PTSD that I didn't know I had. I make much, much less now - but I am content and happy. I do not want to see the IC status go away.

This $600 threshold should be for EACH company, not any total. Just another tax on the poor and middle class. It could actually save money. Fewer tax returns filed, many tax returns made simple.

Edited 1 time(s). Last edit at 11/25/2023 12:22AM by johnb974.

I do not understand what you are saying. How exactly does this hit the poor? And how does it effect your taxes at all? They have not changed the minimum wages or earnings for filing income taxes as far as I have heard. And 1099's have not much to do with the total you pay tax on unless your plan is to cheat.
quote=johnb974]
This $600 threshold should be for EACH company, not any total. Just another tax on the poor and middle class. It could actually save money. Fewer tax returns filed, many tax returns made simple.[/quote]

@sandyf wrote:

How exactly does this hit the poor? And how does it effect your taxes at all?

The way the rule is currently written, the IRS would have the power to make you prove that $50 you got from your cousin was a reimbursement for last week's dinner that you paid, and not for something you sold to gain a profit. This is because pay apps, like PayPal and Venmo currently have no way to sort between taxable income, a loan, a birthday gift, hobby income, etc. Therefore, all money received, regardless of the source or purpose, will be considered income and reported as such. The taxpayer will have to sort it out and have the receipts to back it up. What if your cousin makes a mistake on her taxes and reports that $50 as an expenditure for her work instead? That then sends up a red flag to the IRS because of the inconsistency. The IRS now has a reason to audit you. You better have proof and you better have everything perfect. (Edit to add that lowering the threshold from >$20k to $600 will no doubt capture many app deposits that are not taxable income. While in a literal sense nothing is changing with the tax code, it will put a greater burden on taxpayers to keep up with the proper documents (for 7 years mind you) that relate to something like a family dinner or risk the consequences of an audit.)

According to the Government Accountability Office (GAO), one of the groups that has been more of a target by the IRS recently has been those with annual incomes below $25,000. While the definition of "poor" is subjective, I think most people would say a person who has an income <25k is poor. This rule will no doubt put even more of a target on those who do IC work, and those who run small businesses. These are generally people who cannot afford a good tax attorney to fight for them. They end up paying just to get the IRS off their back. Believe me, the government loves people who easily rollover. It doesn't matter if you've done anything wrong or not. This happens not only with the IRS, but happens daily in the criminal justice system, where those that can least afford a good advocate get railroaded by a zealous government that overcharges someone just so they have leverage to plea them down, and they can give constituents the illusion they are doing something. Meanwhile, prisons get overcrowded, and the government needs more money to run them. This invites corruption on the part of government officials. It is a never ending cycle, and hardworking taxpayers, no matter their income, pay the price at every turn. There is a reason why certain people at the federal level want 80,000 new IRS agents. This is so the government can increase the number of annual audits.

Tax cheats will always find a way to cheat. Honest people will always find a way to do the best they can at reporting what needs to be reported. This rule won't change that. What it will do is increase the chance an honest person will get a notification from the IRS they are being audited.

Edited 2 time(s). Last edit at 11/25/2023 04:36AM by ServiceAward.

What can soon happen is the IRS telling banks to issue 1099's for any deposits you or anyone makes to your accounts. You were not doing any work for these pay apps, they, like a bank, are just a place to deposit your money.

OMG, sorry I made a comment. I hold some trust the government. However I do not trust some people to be honest. And I also have read over and over here on the forum that some people seem to think if there is no 1099 then it is not income and taxes are not owed. In many cases these are the same people who think the government is always out to cheat them so they are bent on cheating the government. If anything I would think this newer rule to get reports of income from places like paypal is to help weed out those trying to hide income from taxes.

@sandyf wrote:

OMG, sorry I made a comment. I hold some trust the government. However I do not trust some people to be honest. And I also have read over and over here on the forum that some people seem to think if there is no 1099 then it is not income and taxes are not owed. In many cases these are the same people who think the government is always out to cheat them so they are bent on cheating the government. If anything I would think this newer rule to get reports of income from places like paypal is to help weed out those trying to hide income from taxes.

The new rule for 1099 and pay apps would have made filing income taxes much more complicated for many people. How is it fair people who don't have a business to have to fill out a schedule C for dining out with family and friends? If your family or friends reimburse you through a pay app it would be counted as income. If friends decide to give you a money gift on a pay app, the IRS will see that as income to you. Many low income people and seniors don't have tax lawyers to help them.

Edited 2 time(s). Last edit at 11/25/2023 07:26AM by johnb974.

@sandyf wrote:

OMG, sorry I made a comment. I

You did not just make a comment. You asked questions which I thought were legit. I tried to answer them.

You don't need a 1099 to report your earnings. Just make sure to keep track of all of your income. I believe most of the MSCs have it broken down already. So you don't have to wait if there is a delay in issuing a 1099. I keep a spreadsheet to track all the income and the expenses (mostly mileage).

I looked up the information on 1099's for business through 3rd party accounts. The information I read from the IRS says it will affect business accounts, not personal accounts on 3rd party sites. If someone is running a business it would be a good idea for them to understand how a business works and that would include in my mind not having personal money running through their business account. It is very easy to set up a personal account on paypal so that if you go to dinner with friends they can reimburse you there.
Many small businesses fail because people do not do the research involved to have a small business. In my city there are many government agencies offering free one on one help to people setting up small businesses. Other cities may have this as well.
I am attaching an informational website, not government sponsored but it seems to explain things well.
[lili.co].

They will not try to tax you for money you get on pay apps, unless you have a business account on the pay app. I understand you may have accidentally created a business account instead of a personal account and received some money, but that is not cause to discard the whole system.

This is simply not true. The new rule (just like the current rule) applies to personal accounts and business accounts.

From the IRS website, "For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for PERSONAL OR BUSINESS accounts that receive over $20,000 in payments from over 200 transactions for goods or services." (Source: [rb.gy])

That's the current rule. As stated earlier, the same problem being discussed exists today, but far fewer people are impacted due to the higher threshold. Most people who receive $20k annually through PayPal, for example, likely are running a business and have a business account. What the new rule will do, if fully implemented, would lower the $20k threshold down to $600. Woah! Now the net captures many more people who are less likely to be receiving money from PayPal because they are business owners. Instead, someone who receives $600 annually in a PayPal or Venmo account would be much more likely to have gotten that money from either 1) A few hobby sales, 2) Reimbursements, or 3) Both. None of those things are considered taxable income by the IRS. But, you will have records on hand to prove that should you be audited. Right now, you would not have to worry about an audit based solely on $10,000 in PayPal transactions, for example. You might be audited for other reasons, but not for that. It is just a given that people with less income overall are likely going to have less money coming through services like PayPal, which is why it has been said this will impact poorer people more so than those with higher incomes.

I, for one, believe the government should not be spending more money going after people who have less money because they might have failed to report $600 income, maybe even on purpose. I'm not saying it is right for someone to not report all taxable income - it is not right. But, government waste is not right either, because it only costs the honest taxpayers' money. Offhand I don't know the average cost to the IRS for conducting an audit. I'm sure the cost would vary depending on how many records are involved. I am also pretty sure the IRS would spend more money tracking down minor tax cheats than the amount of taxes, penalties, etc. they would bring in doing so. Then there is all the money they'll spend going after people who have done no wrong, simply because the threshold has been lowered.

Edited 1 time(s). Last edit at 11/25/2023 05:34PM by ServiceAward.

@ServiceAward wrote:

This is getting off-topic on this thread, and maybe I should start a new one, but the Department of Labor is likely going to rescind the current Independent Contractor rule and issue a new rule that would essentially prohibit companies from classifying workers as Independent Contractors. Instead, workers would have to be classified as employees. This would certainly have an impact on the mystery shopping industry, and it probably would not be good for those of us that do this type of work. It would also impact people that do gig work like Uber, GrubHub, etc.

I'm afraid you're right about this. The rule publication in the Federal Register is online. I've lost the link or I'd post it here.There's a summary at the end of the rule posting that makes it very clear that they will proceed. The Labor Department under this administration flat does not want there to be any such thing as ICs.

The threshold amount is completely irrelevant since you have to report income no matter where it comes from. If you receive $100 each from 10 different companies, you receive $1000 of reportable income. If you receive $1000 from 1 company, you receive $1000 of reportable income. The only difference is that if you receive $1000 from a single company, they send you a 1099 form. That makes it easy for the IRS to find you. Either way, the taxpayer files a single tax return and reports the income on Schedule C. You seem determined to find a way to avoid reporting income to the IRS. That is your personal decision, but you should not, INHO, advise people to find ways to engage in tax fraud.

@johnb974 wrote:

This $600 threshold should be for EACH company, not any total. Just another tax on the poor and middle class. It could actually save money. Fewer tax returns filed, many tax returns made simple.

If you found $20 on the street would you report it as income? According to the IRS you have to. But would you?

If you lost $1000 on the street would you report it as a loss as an itemized deduction on Schedule A (Form 1040), Itemized Deductions (or Schedule A (Form 1040-NR)? The IRS allows that, and if you were in the 25% tax bracket, you would "save" $250. Here is a link to the IRS material on casualty losses: [www.irs.gov]

I can honestly answer "yes" to your question, and yes, I would claim the loss. What are your answers?

@johnb974 wrote:

If you found $20 on the street would you report it as income? According to the IRS you have to. But would you?

@myst4au wrote:

If you lost $1000 on the street would you report it as a loss as an itemized deduction on Schedule A (Form 1040), Itemized Deductions (or Schedule A (Form 1040-NR)? The IRS allows that, and if you were in the 25% tax bracket, you would "save" $250. Here is a link to the IRS material on casualty losses: [www.irs.gov]

I can honestly answer "yes" to your question, and yes, I would claim the loss. What are your answers?

@johnb974 wrote:

If you found $20 on the street would you report it as income? According to the IRS you have to. But would you?

The problem with that scenario is that many people do not itemize, especially if they do not operate a business or own a home. If that person is the finder, they would legally have to report the income. If that person is the loser, their tax savings would be wrapped up in the standard deduction and they lose.

The rule hurts those that are still seeking the American Dream. People win, and the economy grows when people are enabled to succeed, the government cuts spending, and rules and regulations are loosened or done away. This does not mean no spending or no oversight. What it is does mean is that unnecessary spending (i.e. the pork in omnibus spending bills) is cut out, large bureaucracies have their budgets slashed or cut out altogether, and broadly written regulations are condensed and written in a manner that they are specific. When the former two are done, taxpayers will reap the benefits and get to keep more of THEIR money. Money they could use to become a first time home buyer, or a new car, or create an emergency fund, or invest, or save up for the children's college funds so that the government does not have to offer loans that don't get paid back. Or maybe they just want to waste that extra money on frivolous stuff - and since it is their money they can do that.

@ServiceAward wrote:

@myst4au wrote:

If you lost $1000 on the street would you report it as a loss as an itemized deduction on Schedule A (Form 1040), Itemized Deductions (or Schedule A (Form 1040-NR)? The IRS allows that, and if you were in the 25% tax bracket, you would "save" $250. Here is a link to the IRS material on casualty losses: [www.irs.gov]

I can honestly answer "yes" to your question, and yes, I would claim the loss. What are your answers?

@johnb974 wrote:

If you found $20 on the street would you report it as income? According to the IRS you have to. But would you?

The problem with that scenario is that many people do not itemize, especially if they do not operate a business or own a home. If that person is the finder, they would legally have to report the income. If that person is the loser, their tax savings would be wrapped up in the standard deduction and they lose.

The rule hurts those that are still seeking the American Dream. People win, and the economy grows when people are enabled to succeed, the government cuts spending, and rules and regulations are loosened or done away. This does not mean no spending or no oversight. What it is does mean is that unnecessary spending (i.e. the pork in omnibus spending bills) is cut out, large bureaucracies have their budgets slashed or cut out altogether, and broadly written regulations are condensed and written in a manner that they are specific. When the former two are done, taxpayers will reap the benefits and get to keep more of THEIR money. Money they could use to become a first time home buyer, or a new car, or create an emergency fund, or invest, or save up for the children's college funds so that the government does not have to offer loans that don't get paid back. Or maybe they just want to waste that extra money on frivolous stuff - and since it is their money they can do that.

Good point on the itemizing. If you lose $1000 you can only deduct it if you Itemize. If you find $20 on the street, you have to include it as income no matter what. By the way, I would never report finding $20 on the street.
This goes back to the changes in pay apps have to file 1099's. Some people have garage sales or sell items online and take payments on pay apps. They would now have to file a Schedule C. It would be a burden on people just trying to get by. These are people who cannot afford a tax lawyer or accountant.

Edited 1 time(s). Last edit at 11/25/2023 11:48PM by johnb974.

As for people with very low income who are just starting out they do not need to file any taxes if their income is below $12,500 as a single person. However they might want to figure out how to file a schedule C if they have business deductions and I see that as a help to those people John talks about who do not know anything about filing taxes for their business. They are now more likely to just file their gross income as they do not know they can take deductions. They will have to investigate schedule C and learn they can save a lot of tax money. If they already know about deductions than they are smart enough to figure the rest out. There is no reason to hire anyone. There is free tax help for low income people across the nation. If they do not own a computer I can bet they own a cell phone so they can look it up just like they look up other things not related to taxes on their phones. And tax help is probably available in a variety of languages.
As for reporting non income I doubt there are many people who would go ahead and report payment of a dinner bill by a friend as income. If they do they probably have a lot more issues than taxes. Perhaps people who are worried this will happen will put their energies into helping those who need tax help.

@ServiceAward wrote:

This is simply not true. The new rule (just like the current rule) applies to personal accounts and business accounts.

From the IRS website, "For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for PERSONAL OR BUSINESS accounts that receive over $20,000 in payments from over 200 transactions for goods or services." (Source: [rb.gy]).

Actually, you left out an important part. Here is themore complete text:

"For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for personal or business accounts that receive over $20,000 in payments from over 200 transactions for goods or services.

There are no changes to what counts as income or how tax is calculated."

No changes to what counts as income or how tax is calculated. Payments won't become income just because they are reported on the 1099-K. And the payments have to be for goods or services to even be reported n the form at all.

@mystery2me wrote:

@ServiceAward wrote:

This is simply not true. The new rule (just like the current rule) applies to personal accounts and business accounts.

From the IRS website, "For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for PERSONAL OR BUSINESS accounts that receive over $20,000 in payments from over 200 transactions for goods or services." (Source: [rb.gy]).

Actually, you left out an important part. Here is themore complete text:

"For tax year 2023, payment apps and online marketplaces are required to file a 1099-K for personal or business accounts that receive over $20,000 in payments from over 200 transactions for goods or services.

There are no changes to what counts as income or how tax is calculated."

No changes to what counts as income or how tax is calculated. Payments won't become income just because they are reported on the 1099-K. And the payments have to be for goods or services to even be reported n the form at all.

I know there are families who have adult children helping to pay for rent and food. Many of them do not report that as income. If I find $20 on the street, as I have done, I don't report that as income. Do you really think people who win $5 or $20 on the lottery, report it as income.
As I have said, you are not working for pay apps. They should not be reporting deposits on 1099's. Also having pay apps report any deposits, you can now be forced to pay Social Security and Medicare taxes. I don't make enough to pay federal or state taxes, but if you make more than $600 in a year, on a pay app, you're required to pay those taxes. As I keep saying this whole thing is a tax on those just getting by.

Gifts are not taxable; Whatever your adult children or anyone gives you to help out is not taxable.

Yes if you find $20 you may owe taxes. But it is only miscellaneous income and no Schedule C required, so if your income is low enough that you normally don't owe taxes, then you don't have to pay taxes on the $20 bill.

If you win $5 or $20 on the lottery there is a 99 percent chance you have lost much more than that on losing tickets, so you haven't made a profit and don't owe taxes. And if you do, again it is only miscellaneous income.

Yes, iIf you make more than $600 a year (actually at least $400 a year,) you are required to pay into your Social Security. The fact it was on a pay app makes no difference, except it would be harder to cheat.

Yes, a lot of taxes are on those of us just getting by, at the federal, state and local level. That was a deliberate choice by our elected leaders, both parties. To change it we can cut spending on the public good, or we can raise taxes for the wealthy. We can also dodge our tax responsibility as a form of protest -- I completely understand --, but it doesn't make sense to then blame the IRS and not the people who set up the tax system the way it is.

@mystery2me wrote:

Gifts are not taxable; Whatever your adult children or anyone gives you to help out is not taxable.

.
Gifts are not taxable below a certain threshhold. I forget what the amount is. Above the amount, someone is responsible for tax.

But I'm also pretty sure most pay apps give you the choice to choose between payment for goods/services or between friends and family. I think the exact wording differs from app to app, but, more or less the same (I use different apps to reimburse friends for their kids' fundraisers, group lunch, etc.)

If I decided to put money into my own PayPal business account would that be counted as income? PayPal would have to include it on the 1099. If I find $20 on the street, I don't report it as income. That would be foolish. There's no record of it, nothing to report.

Edited 2 time(s). Last edit at 11/27/2023 07:13AM by johnb974.