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Tipsheet

IRS Delays Controversial $600 Reporting Threshold for Venmo Transactions

The IRS has decided, as The Wall Street Journal scooped on Tuesday, to delay the implementation of a rule that would require many Americans who are active in the gig economy — and using Venmo, eBay, AirBnB, Etsy, et al. — to report anything more than $600 in revenue. 

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As the IRS frames its decision to put off implementing the policy, "the additional time will help reduce confusion during the upcoming 2023 tax-filing season and provide more time for taxpayers to prepare and understand the new reporting requirements." But more than removing the burden for small business owners and side-hustle aficionados, the delay gives what has become bipartisan opposition to the plan needed time to ramp up their efforts to block the reporting requirement from ever taking effect.   

The changed reporting threshold for those active in the gig economy came via the American Rescue Plan passed by Congress in 2021 and, if it does eventually take effect, will lead to a significant increase in 1099-K filings that the IRS will add to a growing backlog of more than two million 2021 year tax filings. Currently, the reporting threshold for 1099-K filers is $200,000 — more than 33 times the new amount set to take effect — or 200 transactions in a year.

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As WSJ reported

The $600 threshold would affect many gig workers who are independent contractors and haven’t been reporting income on their tax returns. Paying taxes on those earnings could come as a jolt.

The issues are different for many sellers on eBay and similar platforms, especially casual resellers cleaning out closets and attics. The gross revenue on the form isn’t necessarily all income. Such vendors might not owe any tax if they are selling items for less than they paid—or, when it comes to selling inherited items, less than the item’s value on the date of death.

What ultimately becomes of the new reporting threshold remains up in the air for now, but the bipartisan opposition to the new requirement suggests that the new Congress may, after kicking off in January, have an opportunity to pass a repeal of the $600 threshold. 

Many lawmakers welcomed the delay, as the $600 threshold has attracted opposition this year. Sen. Jon Tester (D., Mont.) voted with Republicans and Sen. Kyrsten Sinema (I., Ariz.) for an amendment—which failed—that would have repealed the $600 requirement and rescinded tens of billions of dollars in IRS funding.

“The IRS should be focused on holding millionaires and massive corporations accountable, not wasting time on unnecessary requirements that confuse hardworking Montanans or small businesses,” Mr. Tester said.

Rep. Carol Miller (R., W.Va.) said she supported the IRS decision while questioning whether the administration had legal authority given the clear deadline in the law.

She urged Congress to repeal the $600 threshold quickly. “This action is inadequate, as tens of millions of taxpayers are still left in limbo as the courts will need to decide the legality of this action from the Biden administration,” Mrs. Miller said.

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It would be silly, given the opposition spanning ideologies in Congress, to waste the chance to show Americans that the Republican-led House and Democrat-controlled Senate can govern in a way that helps Americans.

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