Individuals earning through digital marketplaces like Uber and Airbnb can breathe easy for now, as the IRS has postponed the enforcement of newer tax reporting requirements until at least another year, as declared this past Tuesday. For the second consecutive year, the IRS has chosen to defer the application of a mandate established by Congress back in 2021.
This mandate would have necessitated individuals who accumulated in excess of $600 through such platforms — whether through selling tickets to events or providing services like delivery or pet-sitting — to report this income to the IRS. This delay does not alter the tax liability of individuals who earn through these platforms; they are still responsible for paying taxes on their earnings, regardless of whether they receive a 1099-K form.
IRS Sets 1099-K Issuance Criteria for Gig Economy Transactions
The agency confirmed on Tuesday that for this coming January, only those who have engaged in over $20,000 worth of transactions across at least 200 separate instances will be issued the tax document, the 1099-K. Proponents from the Democratic side had endorsed the reduced threshold, pointing out the dual advantages of simplifying tax payments for gig economy workers, who would otherwise have to tally their earnings manually, and of providing the IRS with data to identify undeclared incomes.
On the other side, some Republicans have criticized the introduction of the 1099-K, raising concerns over IRS intrusion into personal financial activities. Certain Democrats too have voiced their concern post-vote, pondering if the $600 limit was set too low, potentially overburdening both the businesses required to dispatch countless 1099-Ks and the individuals who would be perplexed upon receiving them.
A collective of companies, including those hosting sales for event passes, pre-owned clothing, and artwork, in addition to payment applications, have pushed back against this new directive.
The IRS, however, has stated that starting in 2025, it will mandate companies to issue the 1099-K forms to anyone transacting over $5,000 on their platforms. It plans to implement the $600 benchmark the subsequent year, thereby providing Congress with an opportunity to potentially revise the legislation.