A lawyer representing a coalition of firms who are trying to change new Internal Revenue Service (IRS) requirements about reporting certain payments via Venmo, CashApp, Etsy, and other online services believes that tens of millions of taxpayers will get new tax statements for the first time ever next year.
Under the American Rescue Plan, passed in 2021, services like Venmo and CashApp will have to provide 1099-K forms to taxpayers if they receive payments of $600 or more for the entire year via those services. That threshold lowered from $20,000 under previous rules.
Arshi Siddiqui, with a law firm representing businesses attempting to change the new tax requirements, said she believes that as many as 50 million people would get new tax statements for the first time next year.
Allison Soares, a California tax attorney, told the paper that there will likely be a number of discrepancies, and the burden of proof would be on businesses. “I would anticipate more audits,” Soares said.
A spokesperson for the Treasury Department, Julia Krieger, told the outlet that both the IRS and Treasury may be anticipating possible problems with rolling the program out, saying both are now “laser-focused on quickly identifying a solution to address any challenges taxpayers may face this filing season.” The Epoch Times has contacted the agency for comment.
Gifts Not Impacted
Services like PayPal, CashApp, and Venmo have said that the tax reporting does not apply to payments for gifts, paying rent, or paying back a friend, for example.Meanwhile, CashApp says that “if you have a personal Cash App account, you will not receive a Form 1099-K from Cash App, and Cash App will not report any of your personal transactions to the IRS,” according to a statement on its website.
Another payment service, Zelle, said that it’s not affected by the change. It won’t send out a Form 1099-K, according to its website.
Lawmakers Seek Changes
Earlier this month, Sen. Rick Scott (R-Fla.) proposed a bill to block the IRS’s tax reporting expansion and reverse the $600 threshold via payment apps and services. White criticizing the policy, Scott accused the Treasury Department of launching “an outrageous violation of Americans’ privacy” and added it is “stuff we see in Communist China.”Sen. Ron Wyden (D-Ore.), the head of the Senate Finance Committee, told Treasury Secretary Janet Yellen in a recent letter that the IRS has to bolster its communication with taxpayers regarding the new reporting rules.
“There has been significant confusion about this provision, and the IRS needs to provide greater clarity to taxpayers as soon as possible,” Wyden said, according to the NY Times.
Although Yellen has not issued many public statements on the IRS reporting change, she has shown support for an even more expansive proposal that would allow the IRS to track all $600 transactions—not just those via payment services like PayPal. That controversial proposal was ultimately shot down in 2021, but Yellen said that it was needed to deal with a multi-trillion-dollar tax gap.
“Look, the big picture is that we have a tax gap that over the next decade is estimated at $7 trillion,” Yellen told CBS News last year. “Namely, a shortfall in the amount that the IRS is collecting due to a failure of individuals to report the income that they have earned.”