One of the many measures in the Republican tax and spending megabill that was passed by the House of Representatives last month, which has more than 1,000 pages of text, is to stop the distribution of 1099-K tax forms to employees or vendors who make more than $600 annually.
During a House hearing last week, Treasury Secretary Scott Bessent and Republican Representative Carol Miller of West Virginia praised this specific provision.
During the hearing on Wednesday, Miller informed Bessent, “Republicans have worked to restore the 1099-K threshold to the time-tested standard of $20,000 and 200 transactions by including my Saving Gig Economy Taxpayers Act in the One Big Beautiful Bill.”
Bessent replied that a “underappreciated part of President Trump’s economic plan is the deregulation and what you were describing – the cutting back on paperwork, that putting thresholds at a proper level – is indeed deregulation.”
The American Rescue Plan Act, the Democratic COVID-19 stimulus plan passed in March 2021, mandated that payment platforms produce 1099-K forms to users who receive more than $600 in a year. Supporters claimed that it was partly about assisting gig workers in documenting their income so they can later receive the appropriate Social Security benefits. It was anticipated to raise $8.4 billion over a ten-year period.
The GOP-controlled House attempted to do away with the $600 threshold last year after critics characterized it as onerous or a “cash grab,” but neither the Biden White House nor the then-Democratic-controlled Senate supported the move. However, the Internal Revenue Service delayed the implementation of the new tax-reporting regulation for two consecutive years due to criticism of the $600 level.
Lastly, the IRS mandated that platforms, like PayPal (PYPL) or its sibling company Venmo, submit 1099-K forms disclosing income if payments exceeded $5,000 for the 2024 tax year. The threshold had been lowered to $2,500 for the current year and was finally scheduled to reach $600 for 2026.
However, it appears that the GOP megabill will return the limit to $20,000 and 200 transactions; however, the Senate, which is controlled by Republicans, must still approve the large tax and spending package.
Those celebrating include a group of businesses that have pushed against the $600 level. The lower threshold, according to a recent statement from the Coalition for 1099-K Fairness, which has included Airbnb (ABNB), eBay (EBAY), PayPal, Etsy (ETSY), and other businesses, “threatened to overwhelm small businesses and individuals utilizing payment apps with confusing tax forms and expose millions of transactions to unnecessary scrutiny.” Restoring the prior standard, the group continued, “brings clarity and consistency back to hardworking Americans and reduces administrative waste for both taxpayers and the IRS.”
Does this mean that the $600 threshold or something similar is over? Caroline Bruckner, one supporter, disagrees. She is the managing director of American University’s Kogod Tax Policy Center, a tax professor at the Kogod School of Business, and an authority on the gig economy.
“You cannot have a serious conversation around tax reform, tax fairness and tax administration without acknowledging the fact that at least 70 million Americans now earn income outside of traditional employment with payroll-tax withholding,” Bruckner stated to MarketWatch. When it comes to determining how to make tax compliance easier, Congress has been unable to accept or address the fact that that number is simply too large to ignore.
“It seems to me that there will be a Congress – if not now, at some point in the future – that’s going to have to deal with the consequences of the fact that we do not work in a way that makes it easy to administer our very complex tax laws,” she said.
