The Small Business and Casual Sales Taxpayer Relief Act

Liberty
1

Purpose

This bill seeks to repeal the provision within the American Rescue Plan Act of 2021 that requires third-party payment processors to report income at the new threshold of $600 with a single transaction. By restoring the previous threshold of $20,000 and 200 transactions, this bill aims to reduce administrative burdens on individuals and small businesses engaging in casual, infrequent sales.

Small Business and Casual Sales Taxpayer Relief Act.

Section 2: Findings and Purpose

  1. Findings
    The reduction of the 1099-K reporting threshold to $600 has placed an administrative and financial burden on casual sellers and small businesses.
    Many individuals using third-party payment processors are not running businesses but rather engaging in personal transactions, making this reporting requirement an excessive and often confusing obligation.
    Small businesses, freelancers, and gig economy workers face additional costs and complexities in tax compliance due to the lowered threshold, potentially discouraging business activities and innovation.
  2. Purpose
    To restore the reporting threshold to $20,000 and 200 transactions for third-party payment processors, thereby focusing IRS resources on higher-income earners and reducing the reporting burden for occasional sellers.

Section 3:
Repeal of $600 Reporting Threshold for Third-Party Payment Processors

  1. Amendment to the Internal Revenue Code
  2. The relevant provisions in Section 9674 of the American Rescue Plan Act of 2021, which amend 26 U.S. Code § 6050W to set a $600 threshold for 1099-K reporting, are hereby repealed.

3.Restoration of Previous Threshold

The reporting threshold for third-party payment processors under 26 U.S. Code § 6050W shall revert to $20,000 and 200 transactions, as previously established.

Section 4: Protections for Casual Sellers and Small Businesses

  1. Definition of Casual Sales Exemption
    For purposes of this Act, “casual sales” shall be defined as occasional sales or transactions by individuals not engaged in regular trade or business. Such transactions shall be exempt from 1099-K reporting, regardless of amount, provided they do not exceed 200 transactions per calendar year.

Section 5: Reporting and Enforcement

  1. IRS Guidance and Compliance Reporting:
  • The IRS shall issue updated guidance to clarify the changes under this Act and educate taxpayers, third-party payment processors, and tax preparers.
  • The IRS shall submit an annual report to Congress detailing compliance and enforcement activities related to 1099-K reporting, including any impact on tax revenue.

Section 6: Effective Date

This Act shall take effect immediately upon enactment, and the changes shall apply to transactions beginning in the current tax year.

Summary

The Small Business and Casual Sales Taxpayer Relief Act aims to eliminate the $600 reporting threshold established under the American Rescue Plan Act of 2021. By restoring the previous threshold of $20,000 and 200 transactions, the bill protects casual sellers and small businesses from unnecessary tax reporting requirements, reduces administrative costs, and directs IRS resources toward higher-income earners.