Income Taxes Due Versus Reporting of Income Part Two

Peirspictiochtai Ar An Saol

Income Taxes Due Versus Reporting of Income
Part Two

The Internal Revenue Service is part of the U S Department of the Treasury. (This image was provided courtesy of the U S Department of the Treasury.)

In early 2025, the Internal Revenue Service (IRS) will start receiving notification of the Americans who received $5,000 or more through "Payment Card and Third-Party Network Transactions" during Year 2024.

According to the IRS, "Third party payment organizations include many popular payment apps and online marketplaces."

A few examples of these digital platforms: Airbnb, Block, and StubHub.

People who have "avoided" the accountability of reporting all of their total income to the Federal government will then be faced with the IRS having direct knowledge of those "forgotten" payments.

Americans have been accountable to report all income to the IRS for decades.

Americans have been responsible to pay Federal income taxes due on their income for decades.

It's just that some Americans have "forgotten" to report all of their income to the IRS. With that "forgetfulness," those same Americans may not have paid all of their Federal income taxes that were due to the IRS.

"Forgetfulness" has simply been easier in years past.

For Year 2023 and many previous years, digital platforms were required to report to the IRS payments made through "Payment Card and Third-Party Network Transactions" to Americans who received $20,000 or more AND where those payments involved 200 or more transactions.

The reports to the IRS were made via Form 1099-K. Affected individuals also got a Form 1099-K.

With some exceptions, payments made to individuals that did not meet both requirements – the amount received and the number of transactions involved – did not get reported to the IRS.

The changes in what will now be reported to the IRS - $5,000 in payments regardless of the number of transactions – have generated complaints about this new policy. Those complaints have resulted in delays in expanding the reporting requirements to the IRS.

Implementation of the new requirements has been delayed for both Year 2022 and Year 2023. The rules mandated for Year 2024 are only part of what eventually will be the requirements regarding income paid through "Payment Card and Third-Party Network Transactions."

One of the problems with the complaints about the requirement that digital platforms report certain amounts of income to the IRS is that the IRS was not the actual "bad" guy in this situation.

The IRS has been attempting to implement the legislation that the United States Congress passed and the U S President signed into law: the American Rescue Plan Act of 2021.

This Act became law in March of 2021.

Much of the American Rescue Plan Act of 2021 focused on ways the Federal government would continue to respond to the COVID-19 Pandemic.

Many may recall the situation at the time.

According to a news release issued by the National Institutes of Health on July 5, 2022, "COVID-19 was [the] third leading cause of death in the United States in both 2020 and 2021." The news release referenced "an analysis of national death certificate data by researchers" at a division of this Federal agency.

But the American Rescue Plan Act of 2021 did more than just deal with how the Federal government would respond to the COVID-19 Pandemic.

The Act also changed the way that payments made to many Americans would be reported to the Federal government.

Almost 3 years after it became law, the American Rescue Plan Act of 2021 is only now about to begin impacting how many Americans will file their Federal income tax forms.

Some background:

On March 6, 2021, the U S Senate voted 50 to 49 in favor of the final legislative bill, according to the U S Senate; one senator (from Arkansas) did not vote. Of the 50 Senators who voted in favor of the American Rescue Plan Act of 2021, 48 were Democrats and 2 were Independents. Of the 49 Senators who voted against the legislation, all were Republicans.

Both U S Senators from New Mexico voted in favor of this legislation.

According to the U S House of Representatives, on March 10, 2021, the House of Representatives voted 220 to 211 in favor of the final version of the American Rescue Plan Act of 2021. All Democrats, except for one Representative (a Representative from Maine), voted "yes" for the legislation; all Republican Representatives voted "no" on this legislation. One member of the House of Representatives (a Representative from Wisconsin) did not vote on this legislation.

Two of the three members representing New Mexico in the U S House of Representatives voted in favor of this legislation. Then-Representative Yvette Herrell voted against this legislation; at the time, she represented all of Southwest New Mexico, among other sections of the State, in the U S House of Representatives.

(Please note that members of the U S Congress officially vote "yea" or "nay" rather than "yes" or "no" on legislation.)

President Joseph (Joe) Biden signed the American Rescue Plan Act of 2021 into law on March 11, 2021.

Information about this law is detailed on the website of The White House.

The headline: "Help is here with the American Rescue Plan."

The website makes no mention of how the Act changed some of the requirements for reporting income to the Federal government.

Specifically, Section 9674 of the American Rescue Plan Act of 2021.

The text of that section of the law was summarized by the U S Congress in one line: "(Sec. 9674) This section provides for a de minimis exception to the reporting requirements of third-party network transactions for transactions not exceeding $600."

The full section, of course, is much longer and more detailed.

A number of members of the U S Congress – some of whom voted in favor of this law – have been distancing themselves from that section of the American Rescue Plan Act of 2021.

It's almost as if some members of the U S Congress have been reading a transcript of a news conference held more than 27 years ago.

On August 12, 1986, President Ronald Reagan held a news conference in Chicago, according to a transcript provided by the Ronald Reagan Presidential Library and Museum. Near the beginning of this news conference, President Reagan stated "I think you all know that I've always felt the nine most terrifying words in the English language are: I'm from the Government, and I'm here to help.'"

The next editions of Peirspictiochtai Ar An Saol will provide further details on the information on the actual reporting requirements for payments received through digital platforms and ways in which individuals can determine and document whether the payments received through digital platforms are actually income for which taxes are due.

A caveat: Please contact the IRS or an accountant, attorney, or a tax professional of your choice to determine what your personal responsibilities are regarding taxes.

Peirspictiochtai Ar An Saol – Gaelic – Irish – for "Perspectives On Life" is a column focused on aspects of accountability and responsibility as well as ways people look at life.

Contact Richard McDonough at PeirspictiochtaiArAnSaol@protonmail.com.