(Daily360.com) – Small business owners and people who participate in the gig economy should be aware of a new tax reporting change that could affect how they report their income this year. In March 2021, Congress passed the American Rescue Plan Act, which included third-party transaction reporting requirements for goods and services payments over $600.
In prior tax years, apps like PayPal and Venmo were only required to issue a Form 1099-K if gross payments for the year were over $20,000 across more than 200 transactions. For the 2022 tax year, any number of third-party transactions totaling more than $600 will trigger the form, ensuring Americans pay their fair share of taxes on their income.
Americans who received $600+ on systems like Venmo will receive a tax form this year thanks to a provision passed by Democrats.
The SNOOP Act would revert the threshold to $20k, ensuring everyday Americans aren't subject to this IRS overreach. I urge my colleagues to support it. pic.twitter.com/B4JhDxmSVI
— Congressman Dan Meuser (@RepMeuser) December 7, 2022
Tax Attorney Nancy Dollar told Fox Business the change will affect people simply dabbling in freelance work. It could turn people away from the industry or at least push them to cut back on productivity. However, the reporting requirement doesn’t change anything about the tax law itself. People who earn money from selling goods and services should have already been reporting that income to the IRS. This rule will simply catch those who haven’t been complying with the law. It will not apply to personal transactions.
What do you think of the new requirement? Do you believe the tax agency is overreaching?
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