The IRS again delayed the effective date of the $600 threshold for Form 1099-K reporting for third-party settlement organizations (TPSOs) and will treat 2024 and 2025 as transition years, the Service said Tuesday in Notice 2024-85.

Under the notice, a TPSO will be required to report payments in settlement of third-party network transactions when the amount of total payments for those transactions is over $5,000 during calendar year 2024; over $2,500 during calendar year 2025; and over $600 during calendar year 2026 and after.

The extended transition period is designed to ease the transition for TPSO compliance with Sec. 6050W(e) and participating payee compliance with income tax reporting, the IRS said in the notice.

The IRS has estimated that it will receive 44 million Forms 1099-K, Payment Card and Third Party Network Transactions, under the $600 threshold, more than three times the 14 million that it received in 2023.

Until the American Rescue Plan Act (ARPA) of 2021, P.L. 117-2, was enacted, TPSOs were allowed a de minimis exception to filing Form 1099-K with respect to payees with 200 or fewer such transactions during the calendar year with an aggregate gross amount of $20,000 or less. ARPA amended this de minimis amount to $600, with no minimum number of transactions, effective for calendar years beginning after Dec. 31, 2021.

In December 2022 (Notice 2023-10), the IRS delayed that effective date with respect to Forms 1099-K for calendar 2022. It did so again in November 2023 (Notice 2023-74), with respect to 2023. During both those postponements, the 200 transaction/$20,000 threshold remained. Thus, Tuesday’s notice was the third delay in implementation of the statutory threshold. In November 2023, the IRS announced it was planning to implement the $5,000 threshold for 2024.

The latest notice also provides that, for calendar year 2024, the IRS will not assert penalties under Sec. 6651 or Sec. 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year. 

The lower threshold caused concern among several organizations, including the AICPA. In letters to Congress, the AICPA argued for an increased threshold of $5,000 or more, saying the $600 threshold “will create confusion for the many taxpayers who will have to report each sale or transaction independent of others to correctly calculate gain or loss.”