A cadre of Republican senators is moving to overturn requirements that third-party internet platforms report transactions of more than $600 to the Internal Revenue Service.
GOP lawmakers say the requirement, which was included in President Biden’s coronavirus relief package last year, burdens taxpayers when they file their annual returns.
“The Biden administration is relentless in their attempt to invade the privacy of Americans’ lives and finances,” said Sen. Bill Hagerty, Tennessee Republican. “It is regrettable that this administration insists on advancing their perilous and oppressive political agenda to the detriment of taxpayers’ privacy, heedless of their failed track record of protecting Americans’ confidential data.”
Mr. Hagerty and six other GOP senators have written the Stop the Nosy Obsession with Online Payments (SNOOP) Act. The bill would repeal the $600 reporting requirements for online third-party payment platforms, such as PayPal and Venmo.
If the Republican proposal were enacted, the threshold for IRS reporting would return to the previous standard of 200 commercial transactions per year that exceed $20,000.
Lawmakers say the old rules were efficient in capturing income and monetary transactions that might require IRS purview, without adding undue burdens to individual taxpayers and small businesses.
“The IRS spent much of last year trying to get access to more information about taxpayers’ bank accounts,” said Sen. Cynthia Lummis, Wyoming Republican. “Now they are forcing PayPal and Venmo to put even more burdens on small businesses who use these platforms as a cost-effective way of doing business.”
Under the new IRS regulations, hundreds of thousands of small businesses must disclose all transactions of more than $600. The requirements cover not only commercial enterprises but also individual taxpayers who sell personal items via sites like eBay or Poshmark.
“It is past time we stand up for our small business owners and say ‘no more snooping’ to this Administration’s egregious and unwarranted overreach,” said Mr. Hagerty.
Democrats have defended the IRS reporting requirements, arguing that hundreds of thousands of dollars of income go unreported annually. Those payments, according to Democrats, help fuel the gap between taxes owed and actually paid annually to the IRS.
“A well-functioning tax system requires that everyone pays the taxes they owe,” said Natasha Sarin, deputy assistant Treasury secretary for economic policy. “Overall, the Administration’s compliance initiatives are guided by a singular objective — bringing about an end to a two-tiered tax system, where ordinary Americans comply with their tax obligations, but many high-end taxpayers do not.”
Advocates disagree. They say the new reporting rules will fall heaviest on small businesses and individuals looking to make “a few extra dollars here and there.”
“People who have a side hustle, [like] independent contractors, all of these people are being swept up,” said Grover Norquist, president of Americans for Tax Reform. “It will affect your taxes this year.”
Opponents also note that the $600 reporting requirement will make filing taxes more complicated and expensive at a time when the IRS is besieged with a document backlog.
“President Biden claims he isn’t going to raise taxes on those making less than $400,000, but by increasing reporting requirements for small businesses and independent contractors the cost of doing business just keeps going up,” said Sen. Rick Scott, Florida Republican.
Last year, Democrats were forced to abandon an even more ambitious reporting proposal that would have given the IRS access to bank information on customer accounts with more than $600 in annual deposits or withdrawals.
• Haris Alic can be reached at email@example.com.
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