If you’re afraid of the IRS now, wait until you get a 1099-K


Getty Images/iStockphoto

The Internal Revenue Service is difficult to deal with at the best of times, and tax season is never fun. But in recent years, the IRS has stumbled from crisis to crisis. And for millions of taxpayers, it gets a lot worse.

In 2021, Congress expanded the reporting requirements of the obscure Form 1099-K. This information reporting form tracks business transactions made using a credit or debit card, or peer-to-peer services such as Venmo and Paypal.

Before the change, taxpayers only received a 1099-K if they processed more than 200 business transactions valued at more than $20,000 over the course of a year. Congress removed the transaction threshold and lowered the payment threshold to $600.

As a result, millions of taxpayers who have never seen a 1099-K will receive this one. While no one knows how many Americans will receive these forms, tax lobbyists have put the number at as many as 20 million.

That won’t happen until next tax season, but card processors and peer-to-peer networks are already collecting information about their customers for the IRS — an incredible invasion of privacy. Congress signed this provision into law as part of the American Rescue Plan Act of 2021, and it has never been reviewed by the tax and accounting communities.

The biggest problem is that millions of Americans won’t see this coming. They’ve never received a 1099-K and don’t know what to do with it. While the lower reporting thresholds should get full-time Uber drivers and serial Airbnb landlords to comply, the net has been thrown too far. As a result, someone who opened a Venmo account years ago and verified the business option will now receive a 1099-K for all split bar tabs, rent, and other personal expenses on Venmo throughout 2021. Imagine using your paypal account to make it easier to pay for a vacation only to get a tax form in the mail.

Another problem is double reporting. Some business owners receive a 1099-K from their transaction service and another 1099 from the customer who paid for them. Business owners will have a stack of 1099 that exceeds the actual gross income for their business, which any accountant will explain to you as audit bait.

What about people selling small items on platforms like Ebay?,


Facebook or Amazon? A few baseball cards or old Star Wars toys won’t go unnoticed by the 1099-K. While these taxpayers have always had to report profits from whatever source, the 1099-K could easily give the impression that taxes are due on the gross sales amount, not just the profit made on sale – often negative in the case of collectibles.

The IRS is unable to manage this logistical nightmare. It is currently handling a disastrous and intrusive filing regime that requires taxpayers to send a photo to access their own tax information. In the last two years, the agency suffered the biggest data breach in its history when confidential documents belonging to famous taxpayers were leaked to a news website (a crime that is still unsolved).

This is the same IRS that can’t answer its own 800 number, catch up on a tax return backlog, and keep its antiquated computers from sending duplicate tax returns to millions of Americans. The agency is unable to administer a new 1099-K regime that will capture the economic activity of tens of millions of Americans. The IRS had to pull out auditors and other staff this year to answer the backlog of mail. What will it do next year when the 1099-K forms and questions arrive?

Last year, the Biden administration’s proposal to make banks report deposits and withdrawals totaling over $600 on 1099-INTs was rejected by the public and Congress. Congress should fix the 1099-K issue, but doesn’t have much time. Information is already being gathered about us, and by next tax season it will be too late to avert this catastrophe.

Mr. Ellis is President of the Center for a Free Economy and an IRS Registered Agent.

(12/14/21) The boss of the teachers’ union wants to give millionaires a tax break by reintroducing the deduction for state and local taxes. She hopes this will lead to higher teacher salaries and pensions. Images: Getty Images Composite: Mark Kelly

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the print edition on April 1, 2022.

https://www.wsj.com/articles/internal-revenue-service-taxes-irs-1099-k-form-tracking-payment-transactions-credit-card-venmo-privacy-breach-cybersecurity-11648745007 If you’re afraid of the IRS now, wait until you get a 1099-K

Ethan Gach

TheHiu.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehiu.com. The content will be deleted within 24 hours.

Related Articles

Back to top button