Americans are worried about a new tax reporting requirement that will force applications like Venmo, Cash App, Paypal, Airbnb, and Ebay to send 1099-K forms to users. The U.S. Internal Revenue Service (IRS) is specifically focusing on payments of $600 or more for goods and services received through a third-party payment network.
A new tax reporting requirement from the IRS will require third-party payment processors to send users who receive payments of $600 or more from goods and services a form 1099-K. The third parties must send users the form by mail or electronically for transactions that occurred during the 2022 tax year. The new rule has a number of Americans worried about side hustles, part-time gigs, and under-the-table income.
Janet Yellen defended the push by the IRS to require US banks to report all transactions over $600.
Here's a better idea: How about she disclose the several millions in speaking fees she's received over the last few years from the banks?
— conspiracybot (@conspiracyb0t) June 3, 2022
Furthermore, the new tax reporting requirement could affect cryptocurrency users as specific applications that handle digital currencies will treat transactions as payments. For instance, payment processors like Paypal and Cash App allow customers to accept and make payments using crypto assets. The new rule stemming from the IRS and a direct result of the recently passed American Rescue Plan is a significant increase from the 1099-K rule in the past.
Before the American Rescue Plan passed, the IRS oversight was payments originally beyond $20,000 from people leveraging third-party payment applications. Similar to the current $600 threshold if the user of the payment application exceeds the limit, a 1099-K form must be sent to the user.
Moreover, back when the threshold was $20K the prior requirement also noted it had to be 200 transactions or more. Today, the IRS 1099-K summary says “any number of transactions” must be reported if the payment is over $600.
“It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K,” the U.S. tax agency’s website notes. “You must report on your income tax return all income you receive from your business.”
Americans working in the gig economy and freelancing using third-party payment apps are concerned that the work will be a waste of time if the IRS taxes them. “I love being freelance but a big part of why I love it is I can pocket extra money when I decide to work extra hours,” a childcare worker told the New York Post on Thursday.
Pretty messed up, considering the new irs law where if you make $600 via online transactions you have to pay tax on it, so getting paid back from friends when splitting the bill will be considered “income” and youre about to get touble taxed on everything pic.twitter.com/4n6yUWmAlP
— Brian Farley (@BFar0320) June 9, 2022
Speaking with Bloomberg, an anonymous thrift clothes seller said the new rule will be a headache. The anonymous individual said she sold old clothes on Depop, Ebay, and Facebook Marketplace accruing roughly $15K per year. She’s concerned the new 1099-K requirement will make it so she has “to track everything.”
The IRS wants to monitor how you spend $600 when it reportedly costs the US Navy $25,000 just to turn an air craft carrier.
— Libertarian Party OH (@LPOhio) June 5, 2022
A federal analyst at the Tax Foundation, Alex Muresianu, explained that the IRS tax requirement will be a significant burden. “The administrative burden of figuring out taxes for something like that is such a pain, some people may decide it is just not worth it,” Muresianu said. “And I doubt the IRS is going to be making a lot of revenue on taxing people’s $10,000 side hustle.”
What do you think about the 1099-K rule and the newly enforced $600 threshold? Let us know what you think about this subject in the comments section below.