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Will the IRS Save Democrats from Implementation of Their Own Unpopular 1099-K Surveillance Scheme?

October 16, 2024

“Taxpayers earning less than $200,000 a year will get stuck shouldering 90 percent of the burden of Democrats’ 1099K reporting scheme.”

Washington, D.C. — Gig workers use apps like Venmo and PayPal to sell services and receive tips, while others use them to buy and sell things like couches and concert tickets or pay a neighbor to mow their lawn. In 2021, Democrats in Congress voted to step up IRS scrutiny of 44 million Americans who use one of these third-party payment platforms even if they only engaged in $600 of transactions for tax year 2022 and onward. However, the Biden-Harris Administration has put off implementing this new reporting requirement for two years to give Democrats political cover, tacitly acknowledging this scheme will be a massive burden on taxpayers.

“Taxpayers earning less than $200,000 a year will get stuck shouldering 90 percent of the burden of Democrats’ 1099K reporting scheme,” said House Committee on Ways and Means Chairman Jason Smith (MO-08). “In fact, it will operate like an additional tax on tips – making life harder for hair dressers, Uber drivers, and other gig workers just trying to make a living. The IRS is now playing politics with the new law, not only illegally delaying its implementation to shield Democrats from its terrible consequences, but also illegally adjusting the reporting threshold for tax year 2024. If even the IRS is afraid to implement this monster, then repealing it is just common sense.”

Key Facts:

  • New Tax Burdens for Working American Families: According to the Joint Committee on Taxation, 90 percent of the tax burden of this policy would fall on filers that make less than $200,000. These workers, especially hair stylists, housecleaners, and others in the gig economy, are already trying to make ends meet in the Biden-Harris cost-of-living crisis.
  • Ignoring the Law Means More Uncertainty: Americans have no idea when the law will go into effect, because the IRS keeps making things up. The law did not give the IRS room to delay or change the 1099-K reporting threshold, yet in November 2023, the IRS announced yet another delay in implementation as well as a plan – never authorized by law – to change the reporting threshold to $5,000 for tax year 2024. 
  • IRS Isn’t Even Clear on Who Will Be Affected: A new report from the U.S. Government Accountability Office (GAO) shows that the IRS did not analyze agency or external data to identify potential population sizes of taxpayers who would be affected by different filing thresholds when single-handedly choosing a new reporting threshold for tax year 2024, disregarding how many Americans would receive a new tax form in their mailbox this year. 
  • The IRS Will Question Whether You Really Split the Check: The IRS still has not explained how they plan to distinguish non-taxable income from reimbursements, such as using third-party payment apps to split a restaurant bill with friends or paying rent. 

The IRS wouldn’t be slow walking Democrats’ unpopular policy if it were confident about how effective it would be. That is exactly why Republicans on the Committee on Ways and Means have twice passed H.R. 190, the Saving Gig Economy Taxpayers Act, which would undo this disastrous approach. Though the Biden-Harris Administration has repeatedly skirted the law to avoid sending new tax forms to 44 million Americans in an election year, this fall, Americans are left are wondering if the Administration will delay implementation for a third year. 

Background:

  • On December 23, 2022, the IRS announced its first delay in implementing the 1099-K provision of the American Rescue Plan Act of 2021 (ARPA) to “help reduce confusions during the upcoming 2023 tax filing season.”
  • On April 4, 2023, Chairman Smith and Oversight Subcommittee Chairman Schweikert wrote to the GAO that Americans will struggle to afford accounting and paperwork prep needed to comply with the new IRS reporting scheme.
  • On June 13, 2023, the Committee on Ways and Means voted to repeal this policy as part of the American Families and Jobs Act.
  • On November 15, 2023, a report from the GAO showed that the IRS was ill-equipped to handle the implementation of the Democrats’ new policy.
  • On November 21, 2023, the IRS announced its second delay in implementing the 1099-K provision.
  • On December 21, 2023, Ways and Means Republicans sent a letter to IRS Commissioner Daniel Werfel demanding testimony from the Commissioner so that he could provide an explanation for the agency’s legal rationale for delaying implementation of the 1099-K provision for the second year in a row.
  • When called to testify before the Ways and Means Committee on February 15, 2024, IRS Commissioner Werfel evaded questions regarding the IRS’s authority to change the Form 1099-K threshold without Congressional authorization.
  • On September 11, 2024, the Ways and Means Committee advanced H.R. 190, the Saving Gig Economy Taxpayers Act, repealing the American Rescue Plan Act’s 1099-K provision.