WASHINGTON, D.C. – The Internal Revenue Service (IRS) is threatening Americans who receive more than $600 in revenue via payment networks like Venmo, Paypal, and Cash App will face being audited if they fail to report the transactions in their annual taxes.
The new rule was instituted as part of a provision of the American Rescue Plan Act of 2021, which greatly lowered the previous reporting threshold of $20,000 – and more than 200 transactions within a calendar year – and is considered by many to be an example of excessive government overreach, especially at a time when record inflation is already putting a massive drain on American’s wallets.
The expanded rules will mainly target small business owners, part-time freelance gigs, and individuals selling pricey goods on ecommerce websites such as Ebay, and applies to individual transactions of $600 or more; smaller single-payment amounts do not apply and do not need to be reported.
In addition, rent, vacation, food, one-time online sales transactions, and other noncommercial payments are also exempt from the new rule.
“You should receive Form 1099-K by January 31 if, in the prior calendar year, you received payments from all payment card transactions (e.g., debit, credit, or stored-value cards), and in settlement of third-party payment network transactions above the minimum reporting thresholds,” the IRS said.
The IRS will also receive copies of taxpayers’ 1099-K forms, and failure to report the transactions when doing annual tax returns could result in an audit, the agency warned.
While the change is being explained by the IRS as a means to track down those who are not reporting their entire gross income, critics say that the measure will only harm small business owners and average citizens who are simply struggling to get by while the country is on the cusp of an all-out recession.
The Coalition for 1099-K Fairness – a group consisting of ecommerce sites eBay, Etsy, Mercari, OfferUp, Poshmark, Reverb, and Tradesy who are lobbying against the new rule – say that it will only create economic hardship for their users, many of whom sell online merely to cover necessary personal expenses and are considering no longer doing so due to the increased IRS scrutiny.
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