There are reports the IRS will be tightening its grip on Americans in 2023. The agency, which the late Senate Finance Committee Chairman Orrin Hatch (R-UT) referred to as “the most feared federal agency in the country,” warned small business owners and independent contractors about the need to pay taxes on income exceeding $600.
The announcement puts millions of Americans on notice — failure to report income received through payment systems such as Venmo, PayPal or Cash App could initiate audits and fines.
The IRS notes that employers must report business transactions to the IRS if they exceed $600 for the year. The new regulations replace the current policy that requires employers to send 1099-K forms if an employee or client receives an annual income exceeding $20,000 or if more than 200 transactions were made within a calendar year.
Nancy Dollar, a tax lawyer at Hanson Bridgett, told FOX Business: “I think it will come as a shock out of nowhere that people are getting these.”
Changes in IRS regulations follow the passage of the Democrat-pushed American Rescue Plan and the Biden administration’s plan to expand the IRS by adding $80 million to its budget and increasing its staff by 87,000.
Democrats note the change is intended to crack down on Americans who attempt to evade their tax responsibility by not reporting the full extent of their gross income. Critics allege the policies equate to government overreach and could negatively impact small businesses and self-employed individuals.
The Pew Research Center noted the changes in IRS reporting “threaten to sweep up millions of Americans who make money online. Roughly one in four Americans rakes in extra income on the side by selling something online, renting their home, or using a digital platform to do work.”
Dollar reported:
“Everyone I know offloads old goods that they have on these platforms because it’s so easy. Or they’ve been engaging in gig work on a very casual basis, and that affects gig workers as well who have been underreporting their income. I think it’s going to force people to either cut down on those activities or kind of take them more seriously and track them.”
The IRS stipulates that their new policies only apply to payments received. Therefore, the policies do not pertain to those who use Venmo or PayPal to send a loved one a gift or reimburse a friend for an expense.
A Fox News Business report noted that “also excluded is anyone who receives money from selling a personal item at a loss; for example, if you purchased a couch for $300 and sold it for $250, the amount is not taxable.”
A representative from PayPal clarified: “This doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips.”
Fox News Business also noted that payment apps may “request additional information from users shortly to properly report transactions, and users may be asked to provide their Employer Identification Number (EIN), Individual Tax Identification Number (ITIN), or Social Security Number (SSN) if it’s not already on file.”
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