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Lawmakers cry against Biden IRS reporting requirements on $600 transactions

Republicans are complaining after the IRS reminded Americans to report their $600 Venmo and PayPal transactions to the IRS.

In a provision that the Biden administration claimed was to crack down on wealthy tax frauds, the American Bailout Plan required taxpayers to add to their 1099-K “gross payments for goods or services in excess of $600.”

The IRS released an explanatory Tuesday reminding taxpayers that the filing limit for 1099-K forms would be lowered from $20,000 to $600. The number of transactions that trigger a form receipt will also be reduced from 200 to 1.

The change applies to payments in third-party processors, like Venmo or PayPal, and is for transactions like part-time work, side jobs, or the sale of goods.

The Irs Released An Explanatory Statement Tuesday Reminding Taxpayers That The Filing Limit For 1099-K Forms Would Drop From $20,000 To $600.

The IRS released an explanatory statement Tuesday reminding taxpayers that the filing limit for 1099-K forms would drop from $20,000 to $600.

“If you sold a sofa, resold tickets at the price you paid, or just did extra work, you could draw more scrutiny from the Internal Revenue Service (IRS),’ Republicans on the House Ways and Means Committee wrote in a statement.

Failure to report such payments could trigger an audit, since the IRS obtains a copy of the 1099-K form directly from third-party payment processors.

And earlier this year, President Biden signed into law the Reduce Inflation Act, which mandated the hiring of 87,000 new IRS agents.

The new policy aims to close the tax gap by generating $8.4 billion from 2013 to 2021, according to the Joint Committee on Taxation. It was pitched as a way to help pay for the $3.5 trillion American Bailout Plan, a climate and social spending program.

Tax experts say the new requirement will trigger a flood of new 1099-K forms to be sent to Americans unfamiliar with them and that IRS agents will be overwhelmed with new paperwork to review, increasing processing delays.

Professionals have estimated that the amount of 1099-Ks that could be distributed is as high as $20 million. As of May 2022, the IRS was 21.3 raw paper tax returns behind.

“The 1099-K tsunami is coming in January,” Arshi Siddiqui, a former adviser to House Speaker Nancy Pelosi, D-Calif., and a lobbyist for the 1099-K Coalition for Equity, told Bloomberg Tax. “We’re talking about millions of 1099-Ks issued, some of which are based on transactions that don’t generate tax liability.”

Professionals Have Estimated That The Amount Of 1099-Ks That Could Be Distributed Is As High As $20 Million.

Professionals Have Estimated That The Amount Of 1099-Ks That Could Be Distributed Is As High As $20 Million.

Professionals have estimated that the amount of 1099-Ks that could be distributed is as high as $20 million.

Lawmakers have already introduced bipartisan legislation to reverse the change.

Democratic Reps. Chris Pappas, DN.H., Cindy Axne, Iowa, Linda Sanchez, Calif., and Steven Horsford, Nev., are leading House legislation to raise the 1099-K reporting threshold to $5,000, called Cut Red Tape for Online Sales Law.

Sens. Maggie Hassan, NH, and Kyrsten Sinema, Ariz., are leading parallel legislation in the Senate.

Carol Miller, RW.Va., in the House and Rick Scott, R-Fla., in the Senate are leading a bill to revert the reporting threshold to what it was: $20,000 and 200 transactions, called the Taxpayer Savings Act of gig economy.

Rep. Michelle Steel, R-Calif., and Sen. Bill Hagerty, La., are leading the Stop the Nosy Obsession with Online Payments (SNOOP) Act, a similar bill that would revert reporting requirements to what they were.

Another group of Republicans wrote last week a letter urging the IRS to delay implementation of the rule by one year.

It is now unlikely that either house of Congress will pass a bill to reverse the change before tax forms start coming out in January.

“Millions of Americans you know, moms and dads who are selling online or taking Venmo at a garage sale are going to get confusing forms,” ​​John Berlau, senior fellow and director of financial policy, told DailyMail.com.

“In some cases, they don’t know any tax at all, like when you sell us goods, it’s actually a tax loss. The burden of proof will be on them to dig up old receipts for an item they may have bought 10 years ago to prove they don’t owe.’

While Biden may have pledged not to raise taxes on those making less than $400,000 and his administration has repeatedly insisted that the requirement does not amount to a new tax, critics say the administration is apparently reneging on that promise by increasing the burden on small online sellers and ordinary Americans. .

‘If you’re a taxpayer who may have previously been comfortable filing your own taxes, you may now worry that you may be confused. So it could result in increased costs for families and wasted time preparing their tax forms,” Gary Haglund, tax expert at Americans for Prosperity, told DailyMail.com.

Berlau said the reporting change would not be an effective way to crack down on wealthy tax frauds.

“If they are rich, they already have the accountants, the advisers who know all the deductions in the tax code,” he said.

Republicans launched a new campaign against the change on Twitter last week.

‘Biden’s new army of 87,000 IRS agents isn’t going after billionaires… They’re coming after you. I hope they haven’t sold more than $600 for Packers tickets this year,’ Rep. Tom Tiffany, a Wisconsin Republican, wrote on Twitter.

Americans get $600 on Venmo. Politicians receive $40 million from Sam Bankman-Fried. Guess which one the Democrats think is more problematic?’ joked Rep. Lance Gooden, R-Texas.

Senator Joni Ernst, an Iowa Republican, said: ‘Democrats then: we’re going after the billionaires! IRS now: If you were paid more than $600 last year on Venmo, PayPal, or Zelle, you must report it next year!

“Will the Democrats support deploying the 87,000 IRS agents to audit Ukraine or is the IRS only focusing on the central United States and its $600 Venmo transactions?” Rep. Marjorie Taylor Greene, a Georgia Republican, wrote on Twitter.

A senior aide to Rep. Ralph Norman, RS.C., who led the GOP letter asking the IRS to delay implementation of the requirement, told DailyMail.com there could be “some movement” on the legislation next year. The aide said lawmakers will need time to weigh the consequences, both the added complexity of filing returns for taxpayers and the added scrutiny of the IRS on ordinary Americans.

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Jacky

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