IRS provides transition relief for third-party settlement organizations; Form1099-K threshold is $5,000 for calendar year 2024

The Internal Revenue Service today issued Notice 2024-85 providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during years 2024 & 2025.

Under the guidance issued today, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in year 2026 and after.

Notice 2024-85 also announces for calendar year 2024, that the IRS will not assert penalties under section 6651or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year.

TPSOs that have performed backup withholding for a payee during year 2024 must file Form 945 and Form 1099-K with the IRS and furnish a copy to the payee.
For calendar year 2025 and after, the IRS will assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax.

IRS increasing enforcement of gambling income filing requirements

After the Treasury Inspector General for Tax Administration (TIGTA) found the IRS has not applied tax filing requirements related to reported gambling winnings, the IRS is beginning to take enforcement actions and conduct a review of the reasons non-filers have not been identified. TIGTA found the IRS has not enforced income tax return filing requirements for the recipients of millions of Forms W-2G, Certain Gambling Winnings, that reported millions of dollars in gambling winnings.

TIGTA reached its conclusions after reviewing all the Forms W-2G issued to individuals during tax years 2018 through 2020 and found 148,908 individuals with gambling winnings totaling $15,000 each who were issued Forms W-2G, but did not file a tax return. In total, these non-filers were associated with approximately $13.2 billion in total gambling winnings.

Following TIGTA’s review, the IRS analyzed 17,436 high-income non-filers with a total positive income of $100,000 or more for the 2018 tax year and calculated that it could increase tax revenue by roughly $1.4 billion by addressing 139,045 non-filers with gambling winnings that were included in the agency’s non-filer case creation process inventory. The IRS also said it will begin appropriate enforcement actions for non-filers with gambling winnings for the 2018 through 2020 tax years, including against the top 100 non-filer cases identified by TIGTA.

The IRS also agreed to review and profile the population of non-filers with gambling winnings for the 2018 through 2020 tax years that were not identified by the agency’s Individual Master File Case Creation Non-filer Identification Process (IMF CCNIP). The research will determine potential reasons why non-filer returns were not identified and assess the current state of the returns to determine whether filing requirements have been satisfied. If a taxpayer has not satisfied the filing requirement and enforcement is applicable, then the Collection or Exam divisions will consider manual enforcement.

IRS to pilot new security self-mailer to deliver IP PINs

Taxpayers who typically receive a CP01A, We Assigned You an Identity Protection Personal Identification Number (IP PIN), may notice a change in the look of their mailed IP PINs in 2024. In addition to the traditional delivery of IP PINs in an envelope, the IRS is piloting the use of a security self-mailer for delivery of the IP PINs. Security self-mailers have perforated borders that recipients remove to open the correspondence. You may have received a security self-mailer in the form of your bank PIN or other private correspondence.

Approximately 70% of taxpayers who receive the IP PIN will receive them in the new format. With identify theft on the rise, the IRS is working to make correspondence safer and more secure, ensuring the protection of taxpayer data remains a top priority. Some of these notices will include a survey to help determine the effectiveness of the pilot. If pilot feedback is positive, future use will expand to all CP01As. The way taxpayers use the IP PIN to file their taxes will not change.

IRS Delays 2023 Form 1099-K Threshold, Introduces $5,000 for 2024

In a recent announcement, the Internal Revenue Service (IRS) has decided to delay the implementation of the new $600 Form 1099-K reporting threshold for third-party payment organizations. The IRS is also planning a phased-in approach, with a $5,000 threshold set for 2024 to gradually implement the reporting requirements introduced under the American Rescue Plan.