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Taxes The Internal Revenue Service (IRS) delays new tax rule for e-commerce websites to help alleviate any confusion with the transition

The Internal Revenue Service (IRS) delays new tax rule for e-commerce websites to help alleviate any confusion with the transition (Photo by Justin Sullivan/Getty Images)

By Savannah Young Leaders Staff

Savannah Young

Savannah Young

News Writer

Savannah Young is a news writer for Leaders Media. Previously, she was a digital reporter for WATE Channel 6 (ABC)...

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Dec 27, 2022

IRS Delays E-Commerce Taxes

The Internal Revenue Service (IRS) delays new tax rule for e-commerce platforms to help alleviate any confusion with the transition.

Key Details

  • The IRS has decided to delay a new tax rule for e-commerce platforms such as Venmo, CashApp, and Etsy to tax customers who use the platforms for business and have transactions of more than $600.
  • Originally customers had a threshold of $20,000 before being taxed, but Congress changed it to $600 in 2021.
  • The IRS is giving customers a year to fully understand the change and avoid confusion when the rule goes into effect for next year’s tax season.

Why it’s news

E-Commerce businesses have grown tremendously in recent years, specifically during the pandemic, as many people began trying to generate income from home by selling handmade items online.

Etsy, an e-commerce marketplace, had 7.5 million active sellers on its platform in 2021, a 74% increase from the previous year.

Considering the number of e-commerce businesses popping up, the IRS has changed how internet businesses are taxed. Originally e-commerce users had a threshold of $20,000 in transactions before being taxed, but Congress changed it to $600 in 2021.

Any business with transactions over $600 will be taxed, but the IRS is giving companies a year to get everything in place and avoid confusion before fully instating the tax.

“The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” says Acting IRS Commissioner Douglas O’Donnell.

The IRS says this new tax isn’t to be used for personal transactions on Venmo, Paypal, or other money transfer services. Customers can still pay for concert tickets, dinner, groceries, etc., without worrying about reaching that $600 threshold it is just meant for business transactions.

The Other Side

While many lawmakers were for the new tax law stating that many online businesses were making too much money without being taxed, others were against the law stating that it will hurt small businesses in the U.S.

Many lawmakers urged the IRS to delay the bill to figure out all the small details and ensure it would not hurt small businesses forcing them to close.

Ultimately the bill was postponed for a year to allow businesses to get everything in order, and the IRS said more news will be coming soon.

“I am pleased the Treasury Department, and the IRS listened to my request to delay the 1099-K reporting requirement that will harm small businesses and individuals who sell goods online across America,” says Senator Joe Manchin, a West Virginia Democrat who pressed for a delay in the tax law. “This will allow Congress more time to correct this regulation that puts undue burden on our small businesses.”

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