In a recent announcement, the IRS revealed that individuals receiving payments through online platforms like Uber and Airbnb will not have to worry about new tax reporting rules for at least another year or two. This decision comes as the IRS delays the implementation of a requirement mandated by Congress in 2021, which would have necessitated income reporting for individuals receiving over $600 in payments on these platforms.
Previously, the IRS had proposed to lower the threshold for reporting income to $600, but the old threshold will remain in place for now. Starting this January, companies will only be required to send tax forms, known as 1099-Ks, to individuals who have made more than $20,000 and 200 transactions on the platforms.
It is important to note that this change does not affect the total amount of tax owed by individuals earning income on these apps. Regardless of whether the income is reported on a 1099-K, individuals are still responsible for paying their income tax.
Supporters of the lower reporting threshold argued that it would enhance transparency for both taxpayers and the government. Gig workers, for instance, would have a tax form that simplifies their tax payments, rather than having to manually calculate their income throughout the year. Additionally, the IRS would have access to the 1099-K forms, allowing them to identify individuals who are not reporting their income accurately.
However, critics have raised concerns about the invasion of privacy that may result from the IRS gaining access to personal exchanges. Furthermore, some lawmakers have voiced regrets regarding the complexity of the new requirement, suggesting that the $600 threshold may have been too burdensome for companies tasked with sending potentially millions of 1099-Ks and for taxpayers who may find them confusing.
While many companies, including platforms for selling event tickets, used clothes, artwork, and payment apps, have lobbied against the new rule, the IRS has indicated that starting 2025, companies will be required to send 1099-K forms to individuals with over $5,000 in transactions on their platforms. The $600 reporting threshold is expected to be implemented in the subsequent year, providing Congress with additional time to review and modify the law if necessary.