Americans are concerned about a new tax reporting requirement. This will require applications such as Venmo Cash App, Paypal and Airbnb to send 1099-K forms. The U.S. Internal Revenue Service is focusing on payments exceeding $600 for goods or services that are received via a third party payment network.
US Residents Fear Form 1099-K will Cause Headaches — IRS Says Records Should Reflect Business Income
The IRS has a new tax reporting requirement that third-party payment processors must send users who receive $600 or more in payments from goods or services a form 1099_. For transactions occurring during the tax year 2022, the third party must send the form electronically or by mail to the user. Many Americans are concerned about side hustles and part-time jobs, as well as income below the table.
Additionally, cryptocurrency users could be affected by the new tax reporting requirement as certain applications that deal with digital currencies will consider transactions to be payments. Payment processors such as Paypal or Cash app enable customers to accept and pay using crypto assets. This new rule, which is an IRS result and a direct result the recently passed American Rescue Plan, is significantly different from the previous 1099-K rule.
The IRS had oversight of payments exceeding $20,000 before the American Rescue Plan was passed. This included people who used third-party payment apps. A 1099-K form must also be sent to anyone who exceeds the $600 threshold.
The previous requirement stated that the threshold had to be at least 200 transactions back in the day when it was $20K. The IRS 1099K summary states that any number of transactions must be reported if the payment exceeds $600.
The U.S. tax agency’s website note states that “It is essential that your business books, and records, reflect your business income,” . You must declare all income received from your business on your income tax return.
Tax Foundation Analyst: Tax Requirement’s “Administrative Burden is a Pain”
Americans who work in gig economy or freelancing through third-party payment apps worry that they will be taxed if the IRS taxes their work. A childcare worker said that while she loves being freelance, a large part of what she enjoys about it is the ability to make extra money by working extra hours.
An anonymous thrift clothing seller stated that the new rule would cause headaches when she spoke with Bloomberg. An anonymous seller claimed that she made about $15K a year selling old clothes on Depop and Ebay. She is concerned that the 1099-K new requirement will mean she has to “to track everything.”
Alex Muresianu (federal analyst, Tax Foundation), stated that the IRS tax requirements will be a burden. Muresianu stated that the administrative burden of figuring taxes for something like this is so much, that some people might decide it’s not worth it. “And I doubt that the IRS will be making a lot revenue from taxing people’s side hustle of $10,000.”