Two U.S. senators have introduced legislation to raise the dollar threshold for required reporting on third-party transactions, Accounting Today reported.
The Red Tape Reduction Act, introduced by Sens. Sherrod Brown (D-Ohio) and Bill Cassidy
(R-La.), would raise that threshold from $600
to $10,000. The senators said that their proposal would ensure “that
fewer small businesses and casual sellers receive excessive paperwork
for online sales.”
Last year, the IRS changed the reporting requirement for businesses using payment cards and third-party payment service apps such as Venmo, CashApp, Etsy, StubHub and Airbnb from $20,000 in gross payments from more than 200 transactions to $600 in gross payments. The new requirement, which was scheduled to take effect for the 2022 tax year, was delayed for one year after objections from business groups, lawmakers and others concerned about the prospect of surprise tax bills or audits.
“Ohio small businesses are frustrated with the 1099-K reporting threshold. This red tape hits small businesses and other Ohioans selling products online, sucking time and resources from the smallest online sellers,” Sen. Brown said in a statement. “By raising the threshold, we can prevent the IRS from interfering with minor transactions and cut down on excessive paperwork.”
“The cap the Biden administration implemented is hurting everyone from small business owners to people just trying to pay their rent,” Sen. Cassidy said in a statement. “This bill lifts that cap and prevents the IRS from spying on American taxpayers.”
Brown asked IRS Commissioner Daniel Werfel about a higher threshold and its administration at a Senate Finance Committee hearing last month, Accounting Today reported.
"Absolutely, the higher the threshold, it would reduce volume," Werfel replied. "It would reduce complexity and would make the IRS's job a lot easier. In terms of whether we can support that initiative, that's an issue that I always have to defer to Treasury on. On any piece of legislation, I do not have the authority to give the administration's position. It's Treasury that does that."
Arshi Siddiqui, a partner at law firm Akin Gump who is leading the lobbying efforts for Coalition for 1099-K Fairness, a group of tech companies, praised the proposed legislation.
“This represents a significant step forward and builds upon Congressional support across the political spectrum to ensure that millions of online consumers are not drawn into a web of burdensome tax reporting requirements,” he said in a statement reported by Accounting Today. “The Biden Administration's decision to delay implementation of the new requirement provided a critical window for Congress to act, and the clock is ticking with the delay expiring at the end of the year. The Brown-Cassidy bill underscores the need to act quickly in ensuring that Americans are not hit with a tsunami of 1099-Ks in January, especially as Americans face financial challenges in a post-pandemic economy."