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IRS levies new tax on side income above $600 | IRS | Form 1099-K | Third-party payments

IRS levies new tax on side income above $600 | IRS | Form 1099-K | Third-party payments
IRS levies new tax on side income above $600 | IRS | Form 1099-K | Third-party payments

[The Epoch Times, November 20, 2023](Reported by English Epoch Times reporter Naveen Athrappully/Compiled by Qiusheng) According to a watchdog agency, the U.S. Internal Revenue Service (IRS)’s imposition of new taxes on “gig” workers will result in additional documentation and There will be confusion for individual taxpayers because the agency does not have “centralized leadership” to handle this expansion.

Starting this year, a new IRS rule requires third-party payment networks such as PayPal, Venmo, Amazon and Square to issue 1099-s when their total sales from goods and services transactions exceed $600 in a year. K table. Previously, the threshold for total sales was $20,000 or more.

According to a November 15 report from the US Government Accountability Office (GAO), many taxpayers who have never received a 1099-K form in the past will receive a 1099-K form this year. This could “exacerbate confusion for some taxpayers, such as gig workers, who may not understand the taxability of their payments and taxes owed.”

“For example, some of these taxpayers may not know how to calculate profits or losses or may not understand the information reported on the forms. This puts them at risk of inaccurately reporting income to the IRS or not meeting their tax obligations,” the report states.

The IRS calculates that the new rules will result in 44 million Form 1099-Ks being filed in 2024, an increase of about 30 million. The tax office has “no plans” to analyze the data to support its enforcement and business expansion. “This limits its understanding of changes in taxpayer burdens,” the GAO said.

The GAO also noted challenges the IRS faces in processing “information returns.”

Information returns are submitted by third parties such as employers, businesses, banks, etc., including Form W-2 for employee wages and Form 1099-K submitted by the payment network. The IRS’s compliance program uses these information returns to identify potential fraud and irregularities among taxpayers.

However, the GAO report noted that “the IRS lacks centralized leadership to make strategic decisions related to the use of information returns across the agency.”

“For example, the IRS does not conduct a comprehensive analysis of information returns to determine whether the characteristics of the returns, such as deadlines, meet IRS needs. While information returns support multiple IRS compliance programs, there is no single office responsible for coordinating These jobs.”

a burden to americans

Commenting on the GAO report, the House Ways and Means Committee criticized the new tax rules introduced by Democrats for increasing the burden on ordinary Americans.

A press release issued by the committee on November 16 stated that “more Americans who mow their lawns or sell concert tickets and used couches through Venmo or PayPal will be subject to IRS penalties starting in January 2024 due to a push by Democrats.” Review because IRS Form 1099-K filing thresholds are lowered.”

The GAO reports that “the IRS will send at least 30 million new 1099-K tax forms to Americans’ mailboxes this January, even though the agency has no plan for what to do with the new information and most Americans don’t It’s unlikely to understand how to fill out these forms.”

House Ways and Means Committee Chairman Jason Smith (R-Mo.) called the new tax forms “a New Year’s nightmare for millions of Americans and a mess for the IRS.”

Form 1099-K is for people who engage in activities such as gig work and casual selling to earn side income or additional income by selling services or goods. Form 1099-K is an “information return” filed by a third party such as PayPal. Individual taxpayers can use these returns to complete their tax returns. The IRS uses Form 1099-K to verify taxpayers’ reported income and taxes.

Form 1099-K. (Hapabapa/iStock/Getty Images)

Lowering the gross sales threshold from $20,000 to just $600 was included in the American Rescue Plan Act of 2021. The rule was initially supposed to take effect in the 2022 tax year. However, the IRS postponed this to the 2023 tax year.

Smith said, “The Biden administration’s own deployment of delaying this policy for a year is legally dubious precisely because it is unworkable. The entire plan is just another attempt by Washington Democrats to use the IRS to target working families. One effort at a time.”

“According to the Joint Committee on Taxation, more than 90% of the new tax burden will fall on middle-class families and gig workers, who will be targeted by the Democratic tax plan.”

In its report, the Government Accountability Office recommended that the IRS develop a program to conduct a systematic evaluation of information returns to improve compliance and minimize fraud and filing burden.

The report also asks the IRS to determine the “most appropriate reporting thresholds for payment information,” such as those for Form 1099-K.

Smith said the report shows “the IRS is ill-equipped to handle the implementation of this new policy while it does not even know whether this new policy will help the agency meet its responsibilities.”

“Like much of Democratic tax policy, this is a solution in search of a problem that confuses Americans and puts them at risk of inaccurately assessing their tax burden,” Smith said.

Tax Americans’ Side Hustle Income

Members of the Coalition for 1099-K Fairness include companies such as PayPal, Airbnb, Etsy and eBay. The coalition said millions of Americans and micro businesses will receive Form 1099-K “often without any tax liability, causing fear, confusion, frustration and overreporting of taxable income.”

The PayPal app logo on your phone. (Illustration) (Shutterstock)

A February 2022 survey by the alliance found that most casual sellers only conduct small sales transactions online. The survey noted that in 2021, 86% of them earned less than $5,000 in total income from goods sold online.

For 89% of survey respondents, sales are not their main source of income. 47% are unaware of the IRS’s new filing requirements.

People who engage in these types of side income activities must provide personal information, including a Social Security number or Employer Identification Number (EIN), to the third-party applications with which they conduct transactions.

Once the transaction reaches the $600 threshold, the third party will send the individual a Form 1099-K. If the person does not provide personal information and the transaction reaches the $600 limit, the third party will retain 24% of the money collected through the app.

This payment will be sent to the IRS and will not be refunded to the individual. However, the amount can be reported on the individual’s tax return.

original:‘New Years’ Nightmare’: IRS Targets Gig Workers, Sends 30 Million New Tax FormsPublished in the English Epoch Times.

Editor in charge: Li Lin#

The article is in Chinese

Tags: IRS levies tax side income IRS Form #1099K Thirdparty payments


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