Dennis Turbeville, a woodworker in Washington, used the mobile payment service Venmo to sell his wares, collect payments on a rental property and split his expenses with his family and friends.
He works with an accountant to make sure his payments to the government are correct.
A recent tax change intended to crack down on tax evasion by small businesses and those in the "gig" economy will mean more paperwork and headaches for the IRS, according to Mr. Turbeville. If there are any discrepancies, he hopes his business will not be audited.
The Biden administration made a change to the tax code last year to make sure that people who use services to collect money are reporting their income to the IRS.
Millions of Americans will face additional tax forms, higher tax bills and a lot of confusion as a result of the new requirement. Some middle-class taxpayers and business owners are worried that President Biden will not spare them from more tax scrutiny.
Mr. Turbeville said that it would be very difficult for someone without an accountant to understand it. I don't know a lot about it.
Democrats passed the American Rescue Plan in 2021. It affects taxes that most Americans will pay in three years because it applies to income earned this year. It is expected to raise $8 billion in tax revenue.
As the impact of the rule becomes clear, it is drawing opposition from business groups, lawmakers and others, prompting a scramble within the Biden administration to come up with a solution to avoid another tax season next year.
The tax measure is expected to be scaled back by attaching amendments to the spending package that Congress is attempting to pass this week. Business groups have been urging the Treasury Department to act on its own to delay the new requirements to avoid an administrative crisis at the I.R.S.
Before the rule change, services like Venmo only gave users a snapshot of their income if they had more than 200 transactions. The forms were supposed to be used to determine how much a taxpayer owes.
The number of people who will have to pay more taxes because of the lowered thresholds has been increased.
Many taxpayers who run small businesses mix their business and personal transactions. They could be in trouble with the I.R.S. if their tax forms show they made more money than they did. In some cases, people who sell used items could face high tax bills if they can't locate old receipts that show how much the items cost when they were purchased.
Kidizen, a website for buying and reselling children's clothing and toys, is seeing some of its sellers drop off out of concern that they will face inflated taxes that they do not have the means to contest.
"We fear that this burden is causing so much confusion that it is going to deter casual sellers and parents from selling." The kids clothes that were purchased years ago are being sold.
Taxpayers should pay what the law requires, according to most policymakers. The backlash over the tax changes gave Republicans another way to criticize the Biden administration.
The I.R.S. expansion was blocked last week by Senator Rick Scott of Florida.
The Biden administration is changing I.R.S. standards to begin tracking every financial transaction Americans make in excess of $600. The violation of Americans' privacy is outrageous. We see it in Communist China.
The Democrats have been on the defensive over the law and some of them have called for it to be changed. The Cut Red Tape for Online Sales Act would change the law to make it harder for online sellers to get tax forms showing their sales. She warned that the confusion caused by the tax forms could lead to unneeded taxes.
Lobbyists for online sales and payments platforms are trying to get changes to a year-end spending package that is expected to be passed this week. It's not clear if there is enough support to overturn the measure.
As a result of the American Rescue Plan, as many as 50 million taxpayers will get new tax statements for the first time, according to a partner at the law firm.
If Congress does not act, there will be a lot of people who will be confused.
The Treasury Department wouldn't say anything.
The chairman of the Senate Finance Committee, Ron Wyden of Oregon, spoke to the Treasury Secretary this week and told her that the I.R.S. needs to better communicate with taxpayers about the new rules.
The I.R.S. needs to give greater clarity to taxpayers as soon as possible, according to Mr. Wyden.
The I.R.S. warned taxpayers about the new requirements this month. They were told to make sure they have all of their financial documents in order before they file their tax returns.
The I.R.S. said that a little extra caution could save people a lot of time.
The I.R.S. is in the middle of a leadership transition and is trying to clear a large amount of old tax returns.
Critics of the I.R.S. and the Biden administration argue that Mr. Biden is breaking his pledge not to raise taxes or increase audit rates on Americans who earn less than $400,000 annually.
The president of Americans for Tax Reform said it was all low income. billionaires don't have side jobs where they make money renting their room out
Allison Soares predicted that businesses would have to prove discrepancies on tax forms because of the new policy.
Ms. Soares expects more audits.
Corporations have been anticipating the worst.
Venmo, which is owned by PayPal, is trying to make sure its users are prepared for tax changes that could affect them. Payments not specifically designated as being for goods and services will not be included on the 1099-K that the company gives to users.
Whether it's splitting the bill for dinner, chipping in for a gift, or just sending money to a loved one, payments between two consumer accounts default as a Friends and Family transaction - ensuring they are not taxable or reportable to the I.R.S.
Some users don't know about the differences between personal and business accounts. Some transactions may be lumped together.
Mr Turbeville, the furniture maker, switched away from using Venmo's business service this year because of the additional fees that the company charges, but tracks the business transactions that he uses on the "friend" setting manually. This year's tax season is going to be even messier for him because he is expecting to get an additional tax form from Etsy, which is related to his sales on the website.
Emily gave reporting.
All Rights Reserved © 2024
