Another good provision in the Big, Beautiful Bill repeals President Biden’s villainous Venmo tax. The cancellation of the 1099-K reporting requirement will provide millions of Americans with relief from red tape.
Many people are familiar with the “Venmo tax,” a shorthand reference for new tax reporting requirements for transactions made using apps like Venmo, PayPal, Cash App, or online selling platforms, such as eBay, Poshmark, and Mercari, for goods and services.
For example, a friend splitting a dinner bill with you using Venmo, a Cash App gift for your birthday from a sibling, or payment from the sale of used kids’ clothes and furniture on Facebook Marketplace. All of these income-generating online transactions could trigger new reporting to the IRS thanks to the Biden-era American Rescue Plan Act (ARPA).
ARPA, the $2 trillion spending bill that touched off 40-year-high inflation, was paid for in part on the backs of Americans who use digital platforms to send cash or sell items online.
For years, IW has sounded the alarm on this issue. It affects so many women and families: moms selling items online to make ends meet, friends reimbursing each other.
Originally, this reporting requirement was meant for small businesses selling items online. Reporting kicked in at sales of $20,000 and 200 transactions in a calendar year. This is a reasonable level for someone who is actively in business.
The Biden Administration and Democrat-led Congress lowered that reporting threshold down to just $600 and no transaction limit in a year. This limit was too low, as Democrats even admitted.
The consequence would be that millions of Americans would receive 1099-K forms from online platforms, indicating they needed to report this income. It may or may not have raised their tax burden but certainly would have raised new confusion and complexities at tax time.
For example, sending money to a friend or splitting dinner costs using an app should not be taxable in the way that paying for a service would be. However, unless that is specified in the notes of the transaction, a person might get a 1099-K form requiring that income be reported and then have to prove the IRS otherwise.
For several years, the IRS unilaterally delayed this reporting requirement from taking effect, which is controversial in and of itself, because the agency was ill-prepared for the paperwork mountain that would ensue. It has taken a phased-in approach: for 2024, the reporting threshold was above $5,000; for 2025, it is above $2,500; and in 2026, it will be lowered to just $600.
The Big, Beautiful Bill” would restore the original reporting threshold and free millions of people from the red tape. Passed by the U.S. House of Representatives before Memorial Day, the BBB now sits in the U.S. Senate awaiting action.
The BBB is an important bill that keeps taxes low, expands tax savings for workers, families, and small businesses, and restores business provisions to supercharge private investment.
Repealing the Venmo tax is yet another way this legislation would be good for America.