IRS Delays $600 Crypto Tax Threshold, Citing Need to Clarify Terms Before Rollout

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The Internal Revenue Service (IRS) is delaying the rollout of its new $600 reporting threshold for third-party settlements, saying more clarity is needed before it can get started.

In a new press release, the IRS says that due to the moratorium, third-party settlement firms will no longer be required to report transactions in 2022 that exceed the $600 threshold.

Additionally, the IRS has designated 2022 as the transition period for implementing the new threshold, which was enacted as part of the 2021 U.S. bailout.

The transition period delays the reporting of transactions over $600 to transactions that occur after calendar year 2022. The transition period is intended to facilitate an orderly transition for TPSO [third party settlementsorganization] tax compliance, as well as individual beneficiary income tax reporting compliance.

A Participating Beneficiary, in the case of a Third-Party Network Transaction, is any person who accepts payment from a Third-Party Settlement Organization for a Commercial Transaction.

The IRS says it will provide the appropriate 1099 forms required to report the new threshold to taxpayers who need it when the time comes.

The change under the law is extremely important because tax compliance is higher when amounts are subject to information reporting, such as Form 1099-K. However, the IRS noted that it must be managed carefully to ensure that 1099-Ks are only issued to taxpayers who should receive them.

Additionally, it is important that taxpayers know what to do as a result of this statement, and that tax preparers and software vendors have the information they need to help taxpayers.

According to Acting IRS Commissioner Doug ODonnell, the extra time will help taxpayers transition cleanly to the new system.

To ease the transition and provide clarity for taxpayers, tax practitioners, and industry, the IRS will delay the implementation of the 1099-K amendments. The additional time will help reduce confusion during the upcoming 2023 tax filing season and give taxpayers more time to prepare for and understand the new filing requirements.

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Featured Image: Shutterstock/Mr.Alex M

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