Just in time for Black Friday, Small Business Saturday, and Cyber Monday, the IRS once again delayed the imposition of the 1099-K tax reporting requirement for app-based transactions.
This would require that online platforms and payment apps such as Venmo, CashApp, PayPal, Uber, Airbnb, TaskRabbit, eBay, Etsy, and others would have to issue tax forms (Form 1099-K) to anyone whose annual gross payments on those platforms exceed $5,000 in 2024 regardless of how many transactions they have in one year. Next year, that threshold drops to $2,500 in 2025 and to just $600 in 2026 and thereafter.
This would be a tax nightmare for many regular Americans who use apps like Facebook Marketplace to sell old furniture, Poshmark to sell used kids’ clothes, or Venmo to reimburse friends for dinner. These are likely not taxable transactions, but men and women would be forced to report this during the tax filing season and prove losses.
Democrats imposed these new filing requirements in 2021 to pay for the inflationary American Rescue Plan Act—the federal stimulus bill from the Biden Administration and Democrat-led Congress that touched off 40-year-high inflation. Their goal was to go after small businesses and gig economy income paid through apps and platforms.
Unfortunately, it became abundantly clear very quickly that many more individuals would be caught up in this new reporting requirement as the threshold that triggered new reporting was lowered from $20,000 and 200 transactions in a calendar year to just $600 and no transaction limit.
As my colleague, Noelle Fitchett, explained this time last year
The new requirements will especially affect casual online sellers, who are often individuals selling pre-owned items such as clothing, shoes, and furniture to make extra money, declutter, or for sustainability reasons.
The new reporting requirement may also affect individuals who send friends and family cash for gifts and payments.
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For example, people selling homemade goods on sites such as Etsy or old clothes on apps such as Poshmark, are now met with complicated tax challenges instead of additional income to help make it through the holidays.
Several online selling websites have pushed back against the new 1099-K requirement. eBay has said that “millions of Americans casually selling things online shouldn’t receive unnecessary, invasive, and confusing tax forms for small-time transactions.”
A partisan Congress passed this law, and instead of a bipartisan Congress fixing it, the IRS has unilaterally and without Congressional approval delayed the rule three times and changed the thresholds.
Americans for Tax Reform (ATR) captured an exchange during a House Ways and Means Committee hearing in February with IRS Commissioner Daniel Werfel. Congresswoman Carol Miller (R, WV) grilled the IRS chief over the delayed requirement:
The continued delay of the 1099-K threshold and announcement of a new threshold is an illegal overreach that is not found anywhere in law. Unfortunately, this is just another step in a long string of illegal and questionably legal actions taken by the IRS and the Department of Treasury to either willfully ignore the change or misinterpret the laws that have been passed by Congress. Why was the IRS unable to implement the $600 1099-K threshold passed in the American Rescue Act?
She did not hold back in putting Werfel in his place:
Congress writes the laws. You don’t… Your actions are still illegal.
Conservatives in Congress have attempted to overturn this rule and restore the original transaction/income threshold to prevent massive headaches for potentially millions of American taxpayers. Rep. Miller’s bill, the Saving Gig Economy Taxpayers Act, passed out of the Ways & Means Committee in September. This bill would return the threshold that triggers reporting back to its original level.
The 1099-K rule was an intrusive money grab by the left to pay for a massive spending bill. The IRS has used this onerous and confusing rule as a power grab to enact federal legislation in ways that shield lawmakers from their ill-advised policies. The IRS chief then plays Sants Claus each year by delivering “transition relief” for the new rule to give taxpayers, companies, and the IRS time to prepare for an avalanche of new paperwork.
Don’t call it a Christmas miracle, but rather the IRS flexing its power over the American taxpayers.
Congress can fix this issue once and for all and reclaim its authority from the IRS. We hope they do.