1099 Tax Changes
March 2, 2023
Back in June, we wrote to you about the new 1099-k reporting threshold and how it may affect some companies in the auction industry. While we believe that this rule as written may not affect the auction industry, we, as always, advise you to follow the guidance of your tax professional. You can check here for more information from out last emailed communication on this issue.
I’m writing today to be sure to bring your attention to the fact that the IRS has delayed implementation of this tax code, giving us more time to get an even more precise opinion on its application to the auction industry. Read more here.
This rule will not be implemented for the 2022 tax year. As the IRS reports, "The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan," said Acting IRS Commissioner Doug O'Donnell.” The efforts of NAA’s Advocacy Committee, along with other industries, were instrumental in securing this delay.
We’ll retain seeking stronger clarification of this rule on our legislative agenda, and invite you to join us at our annual [Day on the Hill] event next month to meet with your representatives on this issue and others.
As always, we’ll do our best to keep you apprised of changes that affect the auction industry.
Thank you for being an NAA member!
Aaron Ensminger, CAE
CEO, National Auction Association
June 8, 2022
In January, I emailed you about a change to the IRS tax code (found here) that could be interpreted to change the reporting rules for auction companies: namely, it lowered the 1099k threshold to $600 (from $20,000).
We know from the development of this part of the code that it is intended to ensure that “gig” workers, paid through Venmo, PayPal, etc. have their income reported. However, the definition of a Third Party Settlement Organization could be interpreted to mean an auction company.
As we know, it takes time for even the IRS to examine its own changes to rule on how they apply to different situations, and we promised to keep pushing and keep asking until we had something to report that was reliable. I’m pleased to report that we have that information, and I’m even more pleased to report that this answer comes as a direct result of NAA Members working through NAA.
At Day on the Hill in April, Lance Walker, CAI, BAS, CES, and Past President Terri Walker, CAI, BAS, CES, met with a representative from their Congressman David Kustoff’s office, who took the following questions to the Internal Revenue Service:
“Would an auction company, operating online, with whom sellers do not establish escrow accounts, are unrelated to the sellers, who have agreements regarding payments to sellers, be considered a Third party Settlement organization under IRS tax code, be obligated to report payments to the IRS and issue a 1099k?”
Below is the answer direct from the IRS Chief Counsel’s office:
“…(w)e would tend to think that the auction firm is not a Third Party Settlement Organization with a reporting obligation under section 6050W of the Internal Revenue Code.”
With this information direct from the IRS along with several more “off the record” recommendations from tax professionals, the NAA believes that auction companies are not TPSOs and do not have any new reporting obligations. As always, we recommend that you consult with your own tax professionals to make the final determination for your business.
I sincerely hope that this information helps you and your business… and I’m so proud and thrilled to report this fantastic example of Auctioneers Helping Auctioneers!
Yours,
Aaron Ensminger, CAE
Chief Executive Officer
January 7, 2022
Good afternoon and Happy New Year!
I’m writing to discuss an issue on everyone’s minds in the early days of 2022: the IRS, 1099-ks, and whether the new rules affect auction entrepreneurs.
Please know we’re working hard to find some sort of consensus on this issue. The question at hand is whether your company is a third party settlement organization (TPSO), as defined by the Internal Revenue Service.
As we learn more and are more confident in the assessment of this rule and its impact on our industry, please know we will be communicating what we believe to be best practices and guidance. In the interim, we recommend (as always) talking with your tax preparer/accountant to get their opinions. Additionally, it may be worth considering beginning to collect the information needed to complete a 1099-k in the event that you are required to file.
I’ve also compiled some resources to look through below.
Thanks so much for your patience; I’ll be in touch as we know more.
Yours,
Aaron Ensminger, CAE
Chief Executive Officer
Resources
IRS announces delay of new 1099 reporting
IRS instructions for from 1099-K
IRS Section 6050W FAQ
Bloomberg: New Form 1099 Reporting Coming in 2022
Fox Business: Venmo, PayPal and Cash App to report payments of $600 or more to IRS this year: What to know