Rep. Norman Leads Letter to IRS Regarding New Changes to Form 1099-K Reporting
Washington, D.C., November 29, 2022 | Austin Livingston (202-740-8937)
On Tuesday, Rep. Ralph Norman (SC-05) sent a letter to Acting Commissioner of the Internal Revenue Service (IRS), Douglas O'Donnell, regarding changes to Form 1099-K reporting requirements. Specifically, this letter asks the IRS to delay the implementation of the new lower reporting threshold and requests further details related to implementation and privacy concerns.
The letter is co-signed by 33 additional Members of the House of Representatives.
The American Rescue Plan Act (ARPA) of 2021 amended the Internal Revenue Code to decrease the threshold for reporting on third-party settlement organizations (TPSOs) on Form 1099-K. Reporting requirements changed to any qualifying transaction over $600 where the previous threshold for reporting was $20,000 on 200 or more transactions. The change went into effect on January 1, 2022.
The lowered threshold will result in millions of small business owners, freelancers, independent contractors, and other taxpayers receiving a Form 1099-K for the first time when filing their taxes for year 2022.
In addition, the IRS has issued insufficient guidance to TPSOs (such as Venmo or PayPal) on how companies should discern private transactions not subject to taxation from business transactions. This lack of oversight will result in numerous individuals receiving a Form 1099-K where there is no tax liability.
Concerns over the storage and accessibility of consumer data within the IRS are also in question. The new reporting requirement would demand online marketplaces to collect sensitive taxpayer information and share the data with the IRS. Though in 2021, an audit report conducted by the Treasury Inspector General for Tax Administration (TIGTA) found various problems, most notably the "platforms did not satisfy the minimum mainframe security requirements in several key areas..."
The letter requests the IRS provide details on how it plans to: process millions of additional Form 1099-Ks, differentiate which type of electronic transactions are subject to reporting, prioritize privacy and prevent future data leaks, and respond to taxpayers who receive a Form 1099-K in error for a nontaxable transaction.
Until these details become clear, this letter requests the IRS delay the implementation of these new reporting requirements by one year.
Cosigners include: Rep. Elise Stefanik (NY-21), Rep. Vern Buchanan (FL-16), Rep. Carol Miller (WV-03), Rep. Nancy Mace (SC-01), Rep. Ken Buck (CO-04), Rep. Stephanie Bice (OK-05), Rep. Randy Weber (TX-14), Rep. Mike Bost (IL-12), Rep. Donald Bacon (NE-02), Rep. John Carter (TX-31), Rep. Scott Perry (PA-10), Rep. Louie Gohmert (TX-01), Rep. Jeff Duncan (SC-03), Rep. Ted Budd (NC-13), Rep. Maria Elvira Salazar (FL-27), Rep. Marjorie Taylor Greene (GA-14), Rep. Ann Wagner (MO-02), Rep. Paul Gosar (AZ-04), Rep. Scott Franklin (FL-15), Rep. H. Morgan Griffith (VA-09), Rep. Barry Moore (AL-02), Rep. Tim Burchette (TN-02), Rep. W. Gregory Steube (FL-17), Rep. Kelly Armstrong (R-ND), Rep. Jay Obernolte (CA-08), Rep. Ronny Jackson (TX-13), Rep. Andrew Clyde (GA-09), Rep. Pat Fallon (TX-04), Rep. Debbie Lesko (AZ-08), Rep. Byron Donalds (FL-19), Rep. Doug Lamborn (CO-05), Rep. Ben Cline (VA-06), and Rep. John Moolenaar (MI-04).
Rep. Norman issued the following statement on Tuesday: "Without proper implementation or direction from the IRS of the amended change, I expect the 2022 tax season to be utterly chaotic for taxpayers. The IRS has given no indication they know how to implement the lower threshold of reporting- let alone process the additional filings, and above all has demonstrated the privacy of the American people is of little concern to them. I implore the IRS to delay the execution of this change until they themselves work out how to do it properly."