Congressman Chris Pappas (NH-01) led 15 of his colleagues in a letter to House leadership, asking for Congress to raise the threshold for 1099-K reporting for goods sold on marketplaces before the end of this year to ensure sellers on online marketplaces do not pay more than they owe and limit the amount of personal information they're required to provide online.
In the letter, the lawmakers wrote, "Selling online has empowered millions of Americans to supplement income and find a second life for used goods by connecting with buyers online. As so many Americans have struggled to make ends meet, particularly during the pandemic, selling used personal goods online has been a much-needed economic lifeline. However, a change in tax reporting requirements passed in the American Rescue Plan earlier this year will have the unintended consequence of hurting those selling used goods online, causing confusion and raising significant privacy concerns."
"We are concerned that as currently implemented, millions of Americans with non-taxable events are going to be confused by receiving 1099-K forms when the law goes into effect," the lawmakers continued. "A used good sold for less than the original purchase price will not create any taxable income. Yet these transactions will now trigger IRS reporting requirements, yielding confusion and ultimately overreporting of income, which could result in overpayment as well as ineligibility for certain tax benefits."
Sellers from New Hampshire who could be impacted also shared their concerns about the change.
"I started selling online 11 years ago when my 4 children were very young. I run a small photography business and selling used clothing online supplements my family income. I'll be honest, if this tax situation goes through and if it would require me to hire an accountant to do my taxes, I would no longer sell online, I couldn't afford that additional expense," said Shelly P., a seller from Hampton. She continued to say that selling online "has helped me to support my family and be available for them during the day should they need me for doctor's appointments, etc. I don't sell enough annually to warrant an accountant or complicated tax forms."
"I started buying on eBay over 20 years ago and have very much enjoyed the experience. I did not begin selling items until I retired. I list a lot of old items of mine I no longer need or use, so I am really only listing a small number of items annually. Being a small seller with a limited feedback rating, every dollar that I can acquire through these sales is extremely valuable to me," said Bob H., a seller from Manchester. "If these requirements reduce my very modest earnings from eBay sales it could be crippling and make the entire process burdensome."
The full text of the letter can be found here and below:
Dear Madam Speaker and Chairman Neal:
We greatly appreciate your leadership in negotiating with the Senate to ensure that the House is able to deliver on the President's Build Back Better agenda. As you continue to work for a tax system that works for everyone, we wanted to make you aware of an issue that we are hearing from our constituents.
Selling online has empowered millions of Americans to supplement income and find a second life for used goods by connecting with buyers online. As so many Americans have struggled to make ends meet, particularly during the pandemic, selling used personal goods online has been a much-needed economic lifeline. However, a change in tax reporting requirements passed in the American Rescue Plan earlier this year will have the unintended consequence of hurting those selling used goods online, causing confusion and raising significant privacy concerns.
As you know, Congress lowered the threshold for issuing a 1099-K in Section 9674 of the American Rescue Plan. We are concerned that as currently implemented, millions of Americans with non-taxable events are going to be confused by receiving 1099-K forms when the law goes into effect. A used good sold for less than the original purchase price will not create any taxable income. Yet these transactions will now trigger IRS reporting requirements, yielding confusion and ultimately overreporting of income, which could result in overpayment as well as ineligibility for certain tax benefits.
It is important to note that these types of non-taxable transactions do not hinder low-income individuals' ability to claim critical benefits like the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC) since if there is no profit there is no taxable income.
Further, Section 9674 of the American Rescue Plan will require online platforms to collect more personal information from Americans selling online, raising serious privacy concerns. In order to issue a form 1099-K, platforms will be required to collect Social Security numbers from Americans selling online.
Given that this provision is due to go into effect on January 1, 2022, we urge you to consider raising the threshold for 1099-K for goods sold on marketplaces before the end of this year. We can close the tax gap while ensuring Americans do not pay more than they owe and while limiting potential personal information being provided online.
Sincerely,
Original source can be found here.
