Source: Seeking Alpha
Small business-owners and entrepreneurs are set to face a new range of scrutiny over their incomes and payments from the Internal Revenue Service. Reportedly, a new rule from the IRS would make it necessary for any income over $600 to be reported for side hustlers who use services such as eBay, Venmo, Airbnb and Paypal.
In effect from the 2022 tax year, the new law indicates that payment processors must initiate keeping track of the users receiving more than $600 for payments and services. In turn, submit the surveillance information to the Internal Revenue Service. Clearly, this is a huge leap from annual payments exceeding $20,000 in order to warrant gig workers facing the 1099-K, the tax form for payment service transactions.
Apparently, this is already causing a range of issues for various people who run businesses or do some work on the side. A childcare worker stated how they enjoyed being a freelancer as they could earn some extra money when they decide to ‘work extra hours.’ However, it would be like ‘wasted labour’ if they would have to pay tax on it.
Federal analyst Alex Muresianu pointed out how people may decide it is not worth the ‘pain’ of the ‘administrative burden’ of determining taxes for such cases. He went onto state how the IRS would hardly end up generating much revenue by taxing people’s ‘$10,000 side hustle.’
The group argues the new law means, “Americans who sell only used goods and owe no taxes will now get confusing IRS forms.”
Reportedly, Etsy and eBay have collaborated with small business owners to form the ‘Coalition for 1099-K Fairness.’ This is in order to secure ‘casual online sellers and microbusinesses’ from the burdens of privacy and unfair tax. The group also noted that the law makes ways for an invasion of privacy as the companies would have to collect Social Security numbers from users.
However, this rule would not apply to people paying back their friends for various reasons. Hence it is necessary for users to indicate the purpose of the payment. On the other hand, it is still unclear if one would have to pay a tax for reselling used items, or selling an item at a loss.
Muresianu stated it isa common ground on enforcing the law and imposition of compliance burdens, wondering whether it is worth for IRS’s efforts to chase after one’s marginal side income even if they are earning a profit. With IRS being seriously understaffed, this new law could add to the agency’s burdens.