30 Million New Tax Forms for Gig Workers

Due to the agency’s lack of “centralized leadership” to manage the expansion, a watchdog asserts that a new IRS tax on contract workers would necessitate additional paperwork, which would confuse individual taxpayers. But, 30 million new tax forms for gig workers? We can not get ahead. 😯

Third-party payment networks, including Amazon, Square, PayPal, Venmo, and Venmo, are now obligated to issue Form 1099-K to users who receive aggregate sales of goods and services exceeding $600 in a single year, per a new IRS regulation that went into effect this year.

In the past, aggregate sales exceeding $20,000 constituted the threshold.

The U.S. Government Accountability Office (GAO) reported on November 15 that as a consequence, a significant number of taxpayers who have never received Form 1099-Ks before will do so this year.

Some taxpayers, including contract workers, may become even more perplexed regarding the tax implications of their earnings and the taxes they are required to pay.

“Some of these taxpayers, for instance, might be incapable of performing profit-and-loss calculations or comprehending the data presented on the form.” This exposes them to the possibility of providing erroneous income statements to the IRS or failing to fulfill their tax responsibilities.

I know after this article is published, I will learn about profit-and-loss calculations to calm my nerves.

The new rule would result in the filing of 44 million Form 1099-Ks in 2024, an increase of approximately 30 million, according to the IRS, I repeat, 30 million new tax forms for gig workers and entrepreneurs.

Americans will be burdened by the new tax forms for gig workers

As of now, the tax agency lacks a strategy to analyze the aforementioned data to bolster its enforcement and outreach programs. The GAO stated, “This limits its comprehension of changes in the burden on taxpayers.”

Additionally, the GAO highlighted difficulties the IRS encountered regarding the processing of “information returns.”

Third-party filers, such as banks, employers, and businesses, submit information returns, which include Form 1099-K, which payment networks submit, and Form W-2, which pertains to employee wages.

To detect possible instances of fraud and noncompliance on the part of taxpayers, IRS compliance programs generate these information returns.

The GAO report noted, however, that “IRS lacks centralized leadership to make strategic decisions regarding the agency-wide use of information returns.”

The House Ways and Means Committee criticized Democrats, in response to the GAO report, for imposing the new tax rule on average Americans.

The committee issued a press release on November 16 stating, “As a result of a lower reporting threshold for IRS form 1099-K, more Americans who mow lawns or sell concert tickets and used couches via Venmo or PayPal will have those transactions scrutinized by the IRS beginning in January 2024, thanks to the efforts of Democrats.”

“Even though the agency has no idea what to do with the new information—and it is doubtful that the majority of Americans will understand how to fill them out—the IRS will deliver at least 30 million new 1099-K tax forms to Americans’ mailboxes in January,” according to the GAO report.

The additional tax forms, according to Committee Chairman Jason Smith (R-Missouri), are “a mess for the IRS and a New Year’s horror for millions of Americans.”

The 1099-K form applies to individuals who rely on activities such as contract work and casual sales to generate supplementary or additional income through the sale of their products or services.

Submitted by third parties such as PayPal, Form 1099-K is an “information return.” Taxpayers may utilize these returns to fulfill their tax obligations. The IRS verifies taxpayer-reported income and taxes using Form 1099-K.

Incorporated into the American Rescue Plan Act of 2021 was a provision diminishing the gross sales threshold from $20,000 to a mere $600. The tax year 2022 was the original implementation date for the regulation. The IRS, nevertheless, deferred it until the tax year 2023.

Taxing the side income of Americans

Millions of Americans and micro businesses, according to the Coalition for 1099-K Fairness, which includes PayPal, Airbnb, Etsy, and eBay among its members, receive 1099-Ks “often in situations where there is no tax liability whatsoever,” which “causes fear, confusion, frustration, and overreporting of taxable income.”

In February 2022, the coalition conducted a survey that revealed that the majority of casual vendors engage in online sales transactions of modest value. In 2021, 86 percent of them generated aggregate revenues of less than $5,000 from items sold online, according to the report.

89% of respondents to the survey indicated that selling did not constitute their main source of income. The new IRS reporting requirements were also unknown to 47% of the population.

Individuals participating in these supplementary sources of income are required to furnish the third-party application via which they execute transactions personal data, such as their Social Security number or employer identification number (EIN).

The 3rd party will issue a Form 1099-K to the individual once the transactions surpass the $600 threshold. If the transaction exceeds $600 and the individual fails to provide their personal information, the third party will deduct 24 percent of the payments received through the application.

This sum shall be remitted to the IRS; the individual shall not receive a refund. Nonetheless, the individual is permitted to disclose the sum on their tax returns.

It is bad enough that Amazon and eBay started adding tax back in 2021, now if you make a measly six hundred because you sold a Macbook Pro, you will be alerted by the alphabet boys. America, home of the slave, land of the sheep.

Stay blessed everyone.