UPDATE: IRS Delays $600 1099-K Reporting Threshold, CTA Reporting for Small Biz Still a Go in 2024

By at 30 November, 2023, 12:06 pm

One Down, Another Must Go: IRS Delays $600 1099-K Reporting Threshold for 2023 ($5,000 threshold established), New CTA “Beneficial Ownership” Reporting MUST be Next

by Karen Kerrigan – 

1099-K Reporting Threshold Delayed

On November 21, the IRS announced that it will once again delay implementation of the lower threshold for 1099-K reporting, which dropped from $20,000 to $600 for the 2023 reporting tax year via the American Rescue Plan (ARP).  As I pointed out in a press release about the delay:

“The IRS was wise to make this decision given the potential for massive taxpayer confusion and the general lack of awareness and clarity on the new 1099-K threshold. At least 44 million new forms were expected to flood into the mailboxes of unsuspecting citizens who sell used items or concert tickets online, for example, and many taxpayers receiving these forms would not be required to do anything. But how are they supposed to know that? The absurdity of the new reporting threshold has created a massive make-work scheme for payment apps and online marketplaces. It has generated significant waste and depleted resources within both the private sector and at the IRS.”

In its announcement, the IRS noted it will phase in the reporting requirement. The agency is planning for a $5,000 threshold for tax year 2024 and will eventually get to the $600 threshold. In a press release, House Ways and Means Committee Chairman Jason Smith (R-MO) said the IRS’s delay announcement and plan to phase in the threshold has “no basis in statute” – that is, it is illegal, and being driven by election-year politics. Chairman Smith and his Republican colleagues support full repeal of the new threshold.

SBE Council supports repeal as well, and Congress can do so by passing the Stop the Nosy Obsession with Online Payments Act (SNOOP Act) either separately or as advanced by the House Ways and Means Committee in a broader tax relief and reform package this past June.

Small Business Urges Delay of “Beneficial Ownership” Reporting Requirement

The Corporate Transparency Act’s beneficial ownership reporting requirements will take effect January 1, 2024. Many small business owners are unaware of the new law and its requirements, which will hit practically all small businesses across America. In a letter to House and Senate congressional leaders, the small business community (including SBE Council) urged bipartisan action to delay the burdensome and intrusive new requirement, which comes with steep fines for noncompliance. As the groups wrote in their letter:

“The CTA requires the submission of regular reports to the federal government identifying the beneficial owners of businesses and other legal entities. The stated goal is to target shell companies used in illicit financial transactions, but the new law defines the targeted entities as those having 20 or fewer employees and under $5 million in revenue. In other words, not just shell companies but nearly every small business in America.”

“The scope of the data collection is beyond anything the Federal government has ever attempted outside of the Tax Code. Covered entities will be required to provide the personal information of their so-called beneficial owners – owners, board members, senior employees, attorneys, etc. – and then constantly monitor the information to ensure it is current. The Financial Crimes Enforcement Network (FinCEN) expects to receive more than 32 million separate reports in 2024, with an additional five to six million filings each year thereafter.”

No one is ready for this new law – from the small business owners who are expected to comply with it, to those enforcing compliance in the federal government. Short of full repeal, Congress must delay the CTA requirements.

Related content:

● Main Street Coalition Letter to House Financial Services Committee Chairman McHenry in Support of the Protecting Small Business Information Act (H.R. 4035)

● S-Corp Blog Post on “The Importance of NSBA’s Lawsuit,” challenging the constitutionality of the Corporate Transparency Act

● Big Ideas for Small Business blog post: “New Federal Reporting Requirement for Small Businesses.” As Barbara’s blog points out: “If you asked most small business owners, they’d say that paperwork and red tape are the hallmarks of government and the bane of their existence. Well, it’s about to get worse.”

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council


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