Peirspictiochtai Ar An Saol

Income Taxes Due Versus Reporting of Income
Part One

The Internal Revenue Service is headquartered in Washington, DC. (This photograph was provided courtesy of the U S Embassy In Barbados, the Eastern Caribbean, and the Organization of Eastern Caribbean States.)

Many Americans complain about the taxes that they pay. Few Americans want to pay more taxes than they absolutely have to pay no matter what.

(Yes, there are a few Americans who state – publicly – that they want to pay more in taxes. These individuals are usually very wealthy – very, very wealthy – and could choose to pay more for governmental operations if they actually wanted to do so. They would just write a check – or wire the funds – to the governmental entity of their choice. Some do that, but the reality is that very few Americans do so.)

Yet, Americans also want – nay, demand – a wide variety of services from those same governmental entities.

You can't typically get those services without someone paying the bills.

That "someone" is you and I.

That brings us to the subject of this news column – income taxes due versus reporting of income. For this news column, specifically Federal income taxes due versus reporting of income to the Federal government.

How much you pay and when you pay it are decided by a series of laws, regulations, and policies passed and implemented by both the elected officials in the U S Congress and the U S President, the officials appointed to leadership positions by the U S President, and many unelected and unappointed people employed by the government to enforce what the elected and appointed officials have decided are the laws, regulations, and policies they want enforced.

As such, Americans have a responsibility to pay their taxes due.

To be responsible to pay your taxes due, you have to be accountable for the income you earn.

All income, unless explicitly excluded for tax purposes by the Federal government, is subject to tax by the Federal government.

Whether or not you get a form from the person or entity that paid you money, you are still required to report that income to the Federal government and you are required to pay taxes due on that income.

It doesn't matter the amount of income earned. There is no minimum amount of income that you don't have to report when you file your Federal income tax form(s).

Whether it's $150 or $600, $5,000 or $20,000, or any other amount of money you may receive – you're required to report it to the Federal government and pay taxes due on the net income.

(The Federal tax code is quite detailed, and there are certain individuals with very low incomes overall who are not required to file a Federal income tax form according to the Internal Revenue Service (IRS). For example, the IRS indicated that a 65-year-old single person who had gross income of less than $12,950 in Year 2022 did not need to file a Federal income tax form for Year 2022. But a self-employed person who had net earnings of $400 or more during Year 2022 had to file a Federal income tax form for Year 2022 as well as file quarterly tax payments for each quarter in Year 2022 when income was earned. Even if not required to do so, some people with very low incomes overall may find it advantageous to file a Federal income tax form.)

During the past 2 years, you may have seen a number of news articles detailing changes in how digital platforms – PayPal, Venmo, eBay, and other sites – would be reporting payments made to individuals using those digital platforms. That those digital platforms will now be required to report all individuals who receive $600 or more to the Federal government. That a Form 1099-K would be sent to each of those individuals, with a copy of that Form 1099-K also being sent to the IRS.

Those requirements were supposed to be implemented by the digital platforms for funds paid to individuals in Year 2022.

People complained – loudly – that this should not happen.

Leaders within the Federal government listened to the complaints.

The new requirements were not implemented for either Year 2022 or Year 2023.

But portions of the new requirements will be implemented for Year 2024.

If you receive $5,000 or more through "Payment Card and Third-Party Network Transactions" during Year 2024, you'll be receiving a Form 1099-K detailing those payments. That Form 1099-K is to be sent to you in early 2025. The IRS will also get a copy of your Form 1099-K in early 2025.

The full requirements of the new law are slated to be implemented in Year 2025.

Prior to the new law, digital platforms were required to send a Form 1099-K to all individuals who received $20,000 or more AND where those payments involved 200 or more transactions during a calendar year. Both the amount of funds received and the number of transactions had to be met before a Form 1099-K was required to be generated by the digital platforms.

The underlying foundation of the previous laws, regulations, and policies – as well as the new ones – is based on two concepts that have been baked into our tax code for many decades:

 • The principle that the Federal government does not trust the citizens of the U S to report their income.

• And, if the citizens can't be trusted to report their income, the citizens won't pay all of the taxes due.

Thus, the Federal government mandates that those that pay funds to others must report those payments to the Federal government.

Whether those payments are actual income to the recipients is not always clear.

But to the Federal government, unless the recipient of the funds is able to show that some or all of the funds received are not actually income, the Federal government defaults to the belief that the amounts reported are income for which taxes are due.

The next editions of Peirspictiochtai Ar An Saol will provide further details on the legislation that created the new reporting requirements, 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, tax attorney, or other 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.

© 2024 Richard McDonough