Americans are concerned about a new tax reporting requirement that would force applications such as Venmo, Cash App, PayPal, Airbnb and eBay to send 1099-K forms to users. The US Internal Revenue Service (IRS) is specifically focusing on payments of $600 or more for goods and services received through third-party payment networks.
US Residents Think Form 1099-K Will Cause Headaches – IRS Says It’s Important ‘Records Reflect Business Income’
A new tax reporting requirement from the IRS will require third-party payment processors to send users who receive payments of $600 or more from goods and services, a Form 1099-K. Transactions that occurred during the 2022 tax year will require third parties to send forms to users by mail or electronically. The new testament has many Americans worried about side hustle, part-time gigs and under-the-table income.
Janet Yellen defends the push by the IRS to require US banks to report all transactions over $600.
Here’s a better idea: How will she disclose the many million in speaking fees she’s received over the years from banks?
— Conspiracybot (@conspiracyb0t) 3 June 2022
Furthermore, the new tax reporting requirement could impact cryptocurrency users as specific applications that handle digital currencies will treat the transaction as a payment. For example, payment processors such as PayPal and Cash App allow customers to accept and make payments using crypto assets. The new rule stemming from the IRS and a direct result of the recently passed US rescue plan is a significant increase from the 1099-K rule in the past.
Before the American rescue plan was passed, IRS oversight was basically payments of more than $20,000 from people taking advantage of third-party payment applications. Similar to the current $600 limit, if the user of the payment application exceeds the limit, a 1099-K form must be sent to the user.
Furthermore, when the limit was $20K, the former requirement also noted that it had to be 200 transactions or more. Today, the IRS 1099-K summary states that “any number of transactions” must be reported if the payment exceeds $600.
The US Tax Agency website notes, “It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K.” “You must report all income you receive from your business on your income tax return.”
Tax Foundation Analyst Says ‘Administrative Burden Is A Pain’ Of Tax Requirements
Americans working in the gig economy and freelancing using third-party payment apps are concerned that the work will be a waste of time if the IRS taxes them. One childcare worker told the New York Post on Thursday, “I love being independent, but a big part of why I love it is that I can make extra money when I decide to work extra hours. “
Pretty messy considering the new IRS law, where if you make $600 through an online transaction you have to pay tax on it, so withdrawing payments from friends when splitting the bill would be considered “income.” And you’re gonna tax everything pic.twitter.com/4n6yUWmAlP
— Brian Farley (@BFar0320) 9 June 2022
Speaking with Bloomberg, an anonymous thrift clothing seller said the new rule would be a headache. The unnamed man said he earned about $15K a year selling used clothes on Depop, eBay and Facebook marketplaces. He’s worried the new 1099-K requirement will make it so he’ll have to “track everything.”
The IRS wants to monitor how you spend $600, when it reportedly cost the US Navy $25,000 just to turn over an air craft carrier.
— Libertarian Party OH (@LPOhio) 5 June 2022
Alex Muresianu, a federal analyst with the Tax Foundation, explained that the IRS tax requirement would be a significant burden. “The administrative burden of figuring out taxes for something like this is such a pain, some people may decide it’s not worth it,” Muresianu said. “And I doubt the IRS is going to generate a lot of revenue if people tax it on behalf of $10,000.”
What do you think about the 1099-K rule and the newly implemented $600 limit? Let us know what you think about this topic in the comment section below.
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