WASHINGTON, D.C. – Thanks to Democrats, more Americans who mow lawns or sell concert tickets and used couches through Venmo or PayPal will have those transactions scrutinized by the IRS starting in January 2024 thanks to a lower reporting threshold for IRS form 1099-K. Now, a new report from the Government Accountability Office (GAO) shows that the IRS will send at least 30 million new 1099-K tax forms to Americans’ mailboxes come January, even though the agency has no plan on what to do with the new information – and it is unlikely most Americans will understand how to fill them out.
The misguided policy included in the Democrats’ American Rescue Plan Act lowers the threshold from $20,000 to $600 for Americans to report transactions made using third-party payment platforms. Ways and Means Committee Chairman Jason Smith (MO-08) issued the following statement in response to GAO’s report:
“Thirty million more tax forms flowing into mailboxes across the country will be a new years nightmare for millions of Americans and a mess for the IRS. The Biden Administration itself had to deploy a legally dubious delay of this policy for a year precisely because it is unworkable. The whole plan is just another effort by Washington Democrats to use the IRS to target working families. According to the Joint Committee on Taxation, over 90 percent of this new tax burden will fall on middle-class families and gig workers who will be caught in the crosshairs of the Democrats’ tax scheme.
“Adding insult to injury, GAO’s report shows the IRS is ill-equipped to handle the implementation of this new policy while at the same time it does not even know if it will help the agency carry out its responsibilities. Like with so much of the Democrats’ tax policies, this is a solution in search of a problem – one that will confuse Americans and put them in danger of inaccurately assessing their own tax liabilities.”
Among GAO’s Findings:
- IRS expects to receive 30 million additional forms in 2024 under new 1099-K threshold – but that estimate could rise.
- The IRS lacks the leadership to make strategic decisions related to the use of information returns like the 1099-K form.
- The threshold change could exacerbate confusion among taxpayers, such as gig workers, who may not understand the taxability of their payments and taxes owed. This could lead to errors that cause many Americans to get caught up in additional IRS audits.
- The IRS has not analyzed information returns comprehensively to determine if these forms are even meeting the agency’s needs – and no office has responsibility to coordinate these efforts.
- The IRS does not have a plan to analyze data from this new reporting to make decisions on enforcement and taxpayer outreach – essentially increasing the burden on taxpayers with no plan on what to do with the information the agency will be receiving.
- GAO recommends the IRS balance its information collection protocols with the reporting burdens they impose on American taxpayers.