Lawyer Reveals How Many Taxpayers May Be Impacted by New IRS Rules Coming Next Year

Lawyer Reveals How Many Taxpayers May Be Impacted by New IRS Rules Coming Next Year
Blank U.S. Treasury checks are run through a printer at the U.S. Treasury printing facility in Philadelphia, Pa., on July 18, 2011. William Thomas Cain/Getty Images
Jack Phillips
Updated:
0:00

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.

“If Congress doesn’t act, we’ll see a tsunami of 1099s going out to people who will be confused,” Siddiqui told the New York Times on Dec. 21, noting she believes the Treasury Department may possibly delay or change the ruling without any congressional action.

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.

Last month, the IRS warned taxpayers that they need to have their financial documents ready ahead of filing their tax returns in 2023, while some analysts say that people who tend to file their taxes early should wait if they anticipate receiving a 1099-K form.
“A little extra caution could save people additional time and effort related to filing an amended tax return,” the IRS states. “Now, a transaction exceeding $600 can require the third party platform to issue a 1099-K. Money received through third party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.”

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.
“This doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips,” PayPal says on its website.

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.

Paypal headquarters in San Jose, Calif., on April 9, 2018. (Justin Sullivan/Getty Images)
Paypal headquarters in San Jose, Calif., on April 9, 2018. Justin Sullivan/Getty Images

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.

“Zelle does not report any transactions made on the Zelle Network to the IRS, even if the total is more than $600,” it says on its website. “The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle Network. If payments you receive on the Zelle Network are taxable, it is your responsibility to report them to the IRS.”

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.”

Jack Phillips
Jack Phillips
Breaking News Reporter
Jack Phillips is a breaking news reporter with 15 years experience who started as a local New York City reporter. Having joined The Epoch Times' news team in 2009, Jack was born and raised near Modesto in California's Central Valley. Follow him on X: https://twitter.com/jackphillips5
twitter
Related Topics