Cape News

The Internal Revenue Service (IRS) has postponed the implementation of a controversial reporting requirement under the 1099-K provision of the American Rescue Plan Act of 2021. This move delays increased scrutiny on millions of Americans using third-party payment platforms for transactions over $600, originally set to take effect in tax year 2022.

House Committee on Ways and Means Chairman Jason Smith criticized this delay, stating, "Taxpayers earning less than $200,000 a year will get stuck shouldering 90 percent of the burden of Democrats’ 1099K reporting scheme." He further argued that this policy functions like an additional tax on gig workers such as hairdressers and Uber drivers. According to Smith, "The IRS is now playing politics with the new law," by delaying its enforcement and adjusting thresholds without legal authorization.

A report from the Joint Committee on Taxation indicates that most affected taxpayers earn less than $200,000 annually. This demographic includes gig economy workers who are already dealing with economic challenges.

The IRS's decision to delay implementation raises questions about when these changes will actually occur. Despite lacking legal authority to alter or postpone these requirements, in November 2023, the IRS announced another delay and proposed increasing the threshold to $5,000 for tax year 2024.

The U.S. Government Accountability Office (GAO) found that the IRS did not analyze data to determine how many taxpayers would be impacted by different thresholds. Furthermore, there remains uncertainty about how non-taxable income will be distinguished from reimbursements through payment apps.

Republicans have responded by twice passing H.R. 190, known as the Saving Gig Economy Taxpayers Act, which aims to repeal this policy altogether. The Biden-Harris Administration's postponement during an election year leaves open questions about future implementation.