: IRS warns about new $600 threshold for PayPal, Venmo payments


Millions of gig workers and sellers that use payment networks like PayPal, Venmo and Zelle look set to get a tax form in the new year that they haven’t received before, unless a corporate lobbying push is successful.

The change, which has taken effect with the 2022 tax year, is that third-party payment networks will be required to send 1099-K forms to workers or sellers who have earned more than $600 in a year, down from prior thresholds of $20,000 a year and 200 transactions.

The new approach is due to a provision in March 2021’s American Rescue Plan, which was Democrats’ $1.9 trillion COVID-19 aid package. It’s expected to raise $8.4 billion over 10 years. 

Supporters of the shift say it’s about helping workers document their income so they can later get Social Security and other benefits, while critics have described it as burdensome or a “cash grab.”

A group called the Coalition for 1099-K Fairness has been pushing for Congress to roll back the change to help “casual sellers and micro-businesses,” as part of the usual lobbying by industries for year-end legislation. Its members include eBay

and PayPal
which operates its original payment system as well as other offerings such as Venmo.

“Without timely Congressional action, millions of Americans and fledgling micro-businesses will begin receiving 1099-Ks in January 2023, often in instances where there is no tax liability whatsoever, creating significant confusion and administrative challenges,” the coalition says on its website.

The group says it supports bills put forth by some lawmakers that aim to raise the 1099-K reporting threshold to $5,000 or even put it back at $20,000, saying the measures “represent a starting point for a bipartisan compromise.”

Analysts are divided on whether this lobbying push will be successful. Ben Koltun, director of research at Beacon Policy Advisors, is sounding somewhat upbeat, while Tobin Marcus, senior U.S. policy and politics strategist at Evercore ISI, is skeptical.

“This is something that has bipartisan support, and I still think it’s more likely than not to pass this year,” Koltun said, referring to setting the threshold somewhere above $600, such as at $5,000. But he added that any change would have a price tag and still needs to “reach the critical mass of support among leadership in the House and the Senate.”

Labor is likely to lobby on the other side of the issue, as unions have the view that anything that facilitates reliance on a gig-economy model is bad for workers’ rights and hinders their organizing efforts, according to Marcus.

“If there is a meaningful union lobbying push against that, it probably undermines the broad bipartisan support for it enough that it’s hard to just jam it in late in the process. So it’s conceivable, but I would guess that that’s one of the ones that falls apart,” the Evercore strategist said.

Related: Bipartisan push on R&D tax break looks likely to flop, analysts say

The Internal Revenue Service highlighted the new reporting level in a news release last week that went over some changes for the 2022 tax year.

“Now a single transaction exceeding $600 can trigger a 1099-K,” the IRS said.

Caroline Bruckner, an expert on the gig economy and managing director of American University’s Kogod Tax Policy Center, told MarketWatch in an interview last year that she viewed the change as “making the rules fair for these great, big, enormous online platforms, relative to what small businesses already have been doing at a $600 threshold.”

Bruckner also criticized those who have painted the new reporting level as levying new taxes on gig workers.

“These are existing taxes that people haven’t been compliant with, because they don’t get these forms,” she said during that interview in 2021. “Tax research shows consistently that when taxpayers don’t get reporting forms, they don’t properly report their income.”

She also said the shift should help the government get a better grip on the size of the gig economy.

Meanwhile, Rep. Adrian Smith, a Nebraska Republican, has been among the vocal opponents of the change, as he blasted it last year in a floor speech. He criticized Democrats for “adding a new cash grab — drastically lowering the threshold at which gig workers receive a 1099-K.”

: ‘The Twitter files’ show company’s internal debate on how to handle Hunter Biden laptop story

Previous article

The Tell: A recession akin to 1969-1970 awaits U.S. next year, economist warns

Next article

You may also like


Leave a reply

Your email address will not be published. Required fields are marked *

More in News