The Patriot Post® · In Brief: Don't Raise Taxes on the Middle Class
“Nobody making under 400,000 bucks would have their taxes raised, period,” Joe Biden has said on numerous occasions. That was a lie, if for no other reason that the American Rescue Plan’s IRS reporting requirement on yearly transactions totaling $600 or more. The good news is the IRS recently delayed that for another year. The bad news is it could still hit the middle class, hard. National Review’s Dominic Pino explains:
The IRS announced on November 21 that it would be delaying the enforcement of a provision of the Democrats’ American Rescue Plan Act that would require third-party payment platforms to generate tax forms for anyone with more than $600 worth of transactions annually. The current threshold is $20,000 and 200 transactions.
The American Rescue Plan Act was passed in 2021, and the IRS made the same decision to postpone the $600 threshold last year. That’s because it’s a terrible policy, and Congress should repeal it.
Millions of people use apps such as Venmo, CashApp, or Zelle to make payments between friends or sell stuff they want to get rid of. Think of splitting the bill at a restaurant or receiving a few hundred bucks for an old piece of furniture.
Plenty of people do things like that enough times in a year that they would easily cross the $600 threshold. The IRS estimated that 44 million people would receive a 1099-K form if the $600 threshold took effect, which is 30 million more than currently receive one.
At best, this will create additional paperwork and processing headaches for millions of Americans who, say, sold a piece of furniture and received payment via Venmo, which is a tax in itself on productivity. At worst, it will ensnare middle- and lower-income Americans with additional taxes owed and perhaps even time-consuming audits.
The real target of the $600 threshold is people who have side gigs. For example, some people make between $600 and $20,000 per year selling arts and crafts online in their spare time. That isn’t their primary source of income, but it is technically taxable, in the same way that cash received for mowing someone’s grass is technically taxable. Plenty of people don’t report those relatively modest sources of income. Despite their repeated promises to never increase taxes on people making less than $400,000, Democrats want a piece of that side income.
The $20,000 and 200 transaction threshold ensures that people aren’t deriving their primary income through payment platforms and therefore dodging the income tax entirely. That’s a sensible policy. The $600 threshold, irrespective of the number of transactions, is a dragnet that will catch millions of taxpayers who owe basically nothing, all to punish people who dared to make a little extra money without Democrats being able to skim some of it.
Pino also says it’s great that the IRS delayed this tax hike, though he chastises the IRS for amending the law in the process of not following it. Ultimately, he argues the requirement “should be repealed by Congress, not delayed ad infinitum by the people whose job it is to enforce it.”