The IRS is coming after those earning their income through online services. A second warning issued Tuesday by the Internal Revenue Service (IRS) warns independent contractors that they will have to report online income starting in 2023.
New rules and scrutiny will be applied to people who make money on eBay, Etsy, Poshmark, Uber, and other digital services. The policy applies to anyone who receives goods and services from those platforms or from Venmo, Cash App, Zelle, PayPal, or similar platforms.
In a December 6, 2023 news release, the IRS said,
This is the second in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A ‘Get Ready’ page outlines steps taxpayers can take now to make tax filing easier in 2023 [1].
The Biden administration-backed “American Rescue Plan Act of 2021 lowered the reporting threshold for third-party networks that process payments. According to the IRS,
Now a single transaction exceeding $600 can require the third party platform to issue a 1099-K [2].
This new rule under the American Rescue Plan means that the IRS will be able to figure out what businesses earned via cash apps or other digital services—regardless of what is reported via 1099-K forms.
And the new rule only impacts payments received for goods and services, not gifts. Additionally, digital services like PayPal and others will be mandated to send users 1099-K forms if they met the $600 IRS threshold to report income. About one in four Americans have made money by selling something over the internet or using a digital service to take on work, according to a Pew survey. This means the new reporting rule could possibly impact tens of millions of taxpayers. This is why Americans are paying for an additional 87,000 IRS agents.
A coalition of online businesses is complaining. 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 group warns on its website.
In late November 20, lawmakers wrote a letter to the IRS commissioner saying,
This increased reporting will further complicate the already difficult tax compliance burden that small businesses and individual filers face [3].
The IRS has not responded to the letter. Additionally, last year, Treasury Secretary Janet Yellen said that such reporting rules were needed.
Notes:
- ^https://www.theepochtimes.com/irs-issues-another-tax-warning-to-americans-who-made-more-than-600-online_4907313.html?utm_source=Morningbrief&src_src=Morningbrief&utm_campaign=mb-2022-12-07&src_cmp=mb-2022-12-07&utm_medium=email&est=cKjHu8SgO211QWvIdG3ss2vRujwh2XhBDbJ%2FD7mwhYZkPQNUQ7zUueMGb67AH5bcwgdK (go back ↩)
- ^https://www.theepochtimes.com/irs-issues-another-tax-warning-to-americans-who-made-more-than-600-online_4907313.html?utm_source=Morningbrief&src_src=Morningbrief&utm_campaign=mb-2022-12-07&src_cmp=mb-2022-12-07&utm_medium=email&est=cKjHu8SgO211QWvIdG3ss2vRujwh2XhBDbJ%2FD7mwhYZkPQNUQ7zUueMGb67AH5bcwgdK (go back ↩)
- ^https://www.theepochtimes.com/irs-issues-another-tax-warning-to-americans-who-made-more-than-600-online_4907313.html?utm_source=Morningbrief&src_src=Morningbrief&utm_campaign=mb-2022-12-07&src_cmp=mb-2022-12-07&utm_medium=email&est=cKjHu8SgO211QWvIdG3ss2vRujwh2XhBDbJ%2FD7mwhYZkPQNUQ7zUueMGb67AH5bcwgdK (go back ↩)
