Part-time employment, side businesses, and the sale of goods are all of interest to the IRS (Internal Revenue Service). Individuals must now record transactions worth $600 or more that were made through third-party services like Venmo and PayPal.
No More Privacy- IRS
American company owners who make $600 a year through services like PayPal, Venmo, and Zelle received a warning from the IRS. Owners are required to complete a tax document known as Form 1099-K, according to the notice.
Non-commercial transactions like paying someone back for a dinner or selling furniture will not be covered by the new regulations. The American Rescue Plan Act of 2021, passed by Congress, had a provision that lowered the requirement for reporting from 200 transactions totaling at least $20,000 to one transaction over $600.
The new regulation aims to crack down on Americans who attempt to avoid taxes by failing to disclose all of their gross income. The $3.5 trillion social spending bill, which intends to fund initiatives to invest in childcare, climate change programs, and education was one of the additional reasons this bill was passed.
Any sum reported on Form 1099-K must be included by all filers as part of their company income. Since the IRS will get every 1099-K form from third-party facilitators if a filer fails to declare the full amount could lead to an audit.
Selling sites like eBay and Etsy have reacted negatively to the new law in a significant way. The “Coalition for 1099-K Fairness,” which was created by the two in collaboration with small shops, intends to shield “casual online sellers and micro companies from unreasonable tax and privacy requirements.”
According to the Joint Committee on Taxation, between 78% and 90% of the predicted $200 billion, the IRS would collect will gain from small firms because of the Inflation Reduction Act, which will permit the hiring of 87,000 extra IRS agents.