Republicans cry badly after IRS reminds Americans to report their $600 transactions on Venmo and PayPal to the IRS.
In a provision that the Biden administration claimed was intended to target wealthy tax dodgers, America’s bailout required taxpayers to add “gross payments for goods or services exceeding $600” to their 1099-K.
The IRS released a statement Tuesday reminding taxpayers that the reporting threshold for 1099-K forms would be lowered from $20,000 to $600. The number of transactions that trigger receipt of a form will also be reduced from 200 to 1.
The change applies to payments to third-party processors such as Venmo or Pay Pal and relates to transactions such as part-time work, side jobs or the sale of goods.
The IRS released a statement Tuesday reminding taxpayers that the reporting threshold for 1099-K forms would be lowered from $20,000 to $600
“If you sold a couch, resold tickets for the price you paid, or just did some extra work on the side, you could trigger closer scrutiny from the Internal Revenue Service (IRS),” Republicans on the House Ways and Means Committee wrote in a statement.
Failure to report such payments could trigger an audit, as the IRS receives a copy of the 1099-K form directly from third-party payment processors.
And earlier this year, President Biden signed the Inflation Reduction Act into law, calling for the hiring of 87,000 new IRS officers.
The new policy aims to close the tax gap by taking in $8.4 billion from 2013 to 2021, according to the Joint Committee on Taxation. It has been proposed as a means of funding America’s $3.5 trillion bailout, a social and climate spending program.
Tax experts say the new requirement will trigger a spate of new 1099-K forms going out to Americans unfamiliar with them, and IRS agents will be overwhelmed with the new paperwork to look at what increased processing delays
Experts have estimated that the number of 1099-Ks that could be distributed alone is as many as 20 million. As of May 2022, the IRS had a backlog of 21.3 unprocessed paper tax returns.
“The 1099-K tsunami is coming in January,” Arshi Siddiqui, former advisor to Speaker Nancy Pelosi, D-Calif., and lobbyist for the 1099-K fairness coalition, told Bloomberg Tax. “We’re talking millions of 1099-K exits, some of which are based on transactions that don’t trigger tax liability.”
Experts have estimated that the number of 1099-Ks that could be distributed alone is as many as 20 million
Lawmakers have already introduced bipartisan legislation to reverse the change.
Democratic Rep. Chris Pappas, DN.H., Cindy Axne, Iowa, Linda Sánchez, Calif., and Steven Horsford, Nevada, are leading House legislation to raise the 1099-K reporting threshold to $5,000, in what is known as Cut Red Tape for Online is referred to as Sales Law.
Sens. Maggie Hassan, NH, and Kyrsten Sinema, Arizona, are leading parallel legislation in the Senate.
Carol Miller, RW.Va., in the House of Representatives and Rick Scott, R-Fla., in the Senate are leading a proposal to reset the reporting threshold to what it was — $20,000 and 200 transactions — called the Saving Gig Economy Taxpayers Act.
Rep. Michelle Steel, R-Calif., and Sen. Bill Hagerty, La., are leading the Stop the Nosy Obsession with Online Payments (SNOOP) Act, a similar law that would restore reporting requirements to what they were.
Another group of Republicans wrote last week a Letter Urging the IRS to delay implementation of the rule by a year.
It is now unlikely that either chamber of Congress will pass a bill to reverse the change before the tax forms are issued in January.
“Millions of Americans you know mom and dad selling online or picking up Venmo at a flea market are going to get confusing forms,” John Berlau, Senior Fellow & Director of Finance Policy, told .
“In some cases they don’t know any taxes at all, for example if you sell us goods it’s actually a tax loss. The onus will be on them to dig up old receipts for an item they may have bought 10 years ago to prove they owe nothing.
While Biden may have pledged not to levy taxes on those earning less than $400,000 and his administration has repeatedly insisted the requirement does not amount to a new tax, critics say the administration is allegedly breaking that promise by increasing the burden on small online sellers and everyday Americans.
“If you’re a taxpayer who used to feel comfortable filing your own taxes, you might now worry that you might be confused. This could potentially result in increased costs for families and wasted time preparing your tax forms,” Gary Haglund, tax expert at Americans for Prosperity, told .
Berlau said the report change was not an effective way to crack down on wealthy tax dodgers.
“If they’re wealthy, they already have the accountants, the advisors, who know all the deductions in the tax code,” he said.
Republicans launched a new campaign against the change on Twitter last week.
“Biden’s new army of 87,000 IRS agents isn’t after billionaires… They’re after you. I hope you didn’t pay more than $600 for Packers tickets this year,” Rep. Tom Tiffany, R-Wisc., wrote on Twitter.
“Americans get $600 on Venmo. Politicians receive $40 million from Sam Bankman-Fried. Guess what the Democrats think is a bigger problem?” joked Rep. Lance Gooden, R-Texas.
Sen. Joni Ernst, R-Iowa, said: “Dems then: We’re after billionaires! IRS Now: If you received over $600 last year on Venmo, PayPal, orzelle, you need to report it next year!
“Will the Democrats support the deployment of the 87,000 IRS agents to scrutinize Ukraine, or will the IRS only target Central America and its $600 Venmo deals?” Rep. Marjorie Taylor Greene, R-Ga., wrote on Twitter.
A senior adviser to Rep. Ralph Norman, RS.C., who led the GOP letter in which the IRS delayed implementing the requirement, told there will be “some movement” in legislation over the next year could. The adviser said lawmakers will need time to assess the implications — both the added complexity of filing for taxpayers and the added IRS scrutiny of everyday Americans.