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!
Aaron Ensminger, CAE
Chief Executive Officer
IRS instructions for form 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