Cassidy urges amendment to child tax credit deal, targeting $600 IRS Venmo reporting rule
Sen. Bill Cassidy Advocates for Changes to IRS Reporting Requirement in Tax Bill
Sen. Bill Cassidy (R-LA) is pushing for modifications to a controversial $600 IRS reporting requirement to be included in the child tax credit and business tax bill. The legislation has already passed the Ways and Means Committee with a bipartisan vote of 40-3 and will now move to the broader House. However, its fate in the Senate remains uncertain as the Finance Committee will review the bill.
This bipartisan tax legislation presents an opportunity for additional changes, and lawmakers in both the House and Senate are hopeful that it will address a 2021 law implemented during the Biden administration. This law mandates payment platforms like Venmo and Paypal to send 1099-K tax forms to individuals receiving over $600 per year.
Sen. Cassidy, who previously introduced separate legislation to raise the reporting threshold to $10,000, is now urging the committee to include his proposed fix in the tax bill. He believes that the current cap imposed by the Biden administration is negatively impacting small business owners and individuals struggling to meet their financial obligations.
It is worth noting that the IRS has delayed the implementation of this reporting requirement for two consecutive years. In November, they announced that 2023 would be another “transition year” to minimize confusion caused by the distribution of an estimated 44 million 1099-K forms to taxpayers.
Efforts to Change the Reporting Requirement
Efforts to modify the $600 reporting requirement have gained traction in the House. A group of bipartisan lawmakers, including Reps. Chris Pappas (D-NH), Ann Wagner (R-MO), and Tim Burchett (R-TN), sent a letter to House and Ways and Means Committee leadership requesting a fix be included in the legislation. They emphasized the need for a long-term legislative solution to provide certainty for online sellers and prevent millions of Americans from receiving confusing tax forms for online transactions once the current pause expires.
The tax plan under consideration is the result of negotiations between Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR). The plan aims to expand the child tax credit by increasing the maximum refundable amount per child and making the credit more generous on a per-child basis. It also includes renewals of key tax deductions for businesses, such as research and development costs.
Despite receiving endorsement from the White House and passing the Ways and Means Committee, the bill’s passage, especially in an election year, remains uncertain. Sen. Thom Tillis (R-NC) recently expressed opposition to the Wyden-Smith bill in its current form, citing concerns about its funding.
Paying for the Legislation
The legislation proposes funding changes through adjustments to the pandemic-era employee retention tax credit (ERC), which incentivized business owners to retain employees. It would move the filing deadline for backdated ERC claims to January 31 and increase penalties for promoters involved in aiding and abetting the understatement of business owners’ tax liability.
The Joint Committee on Taxation estimates that these ERC changes would result in approximately $77 billion in savings, making the overall bill deficit-neutral. However, if the provisions were made permanent, it would cost $645 billion through 2033, according to the Committee for a Responsible Federal Budget.
Despite the potential benefits of the bill, deficit-minded Republicans are cautious about making the tax cuts permanent. The bill currently includes a sunset provision in 2025.
Read more from the Washington Examiner here.
In what ways do payment platforms like Venmo and Paypal believe that the reporting requirement places unnecessary administrative burdens on their users?
Rom being burdened with unnecessary reporting requirements.
In the Senate, Sen. Cassidy’s proposal to raise the reporting threshold to $10,000 has gained support from several colleagues across the aisle. Sen. Ron Wyden (D-OR) and Sen. Steve Daines (R-MT) have both expressed their willingness to work with Sen. Cassidy in finding a bipartisan solution to address the concerns raised by small business owners and individuals.
The push for changes to the reporting requirement stems from the belief that the current threshold of $600 places an undue burden on small businesses and individuals who engage in occasional or low-value transactions. These individuals may not have the resources or infrastructure to comply with the reporting requirements, leading to additional paperwork and potential financial strain.
Furthermore, critics argue that the reporting requirement creates a disproportionate burden on individuals who rely on payment platforms like Venmo and Paypal for peer-to-peer transactions. These platforms were initially designed for personal use, and the reporting requirement places an unnecessary administrative burden on individuals who are not engaged in extensive business activities.
Proponents of raising the reporting threshold argue that a higher threshold would better target the reporting requirements on businesses and individuals who engage in significant transactions and have the capacity to comply with the reporting obligations. This would relieve the burden on small businesses and low-value transaction participants, allowing them to focus on their operations and financial stability.
As discussions continue in both the House and Senate, it remains to be seen whether Sen. Cassidy’s proposed modifications to the reporting requirement will be incorporated into the final version of the tax bill. Lawmakers on both sides of the aisle are committed to finding a fair and balanced solution that promotes economic growth while ensuring a reasonable level of compliance with tax reporting obligations.
Ultimately, the fate of the modified reporting requirement lies in the hands of lawmakers as they weigh the potential impact on small businesses, individuals, and the overall economy. As the tax bill progresses through the legislative process, it is crucial for stakeholders to engage in productive dialogue to ensure that the final legislation establishes a reporting threshold that strikes the right balance between compliance and alleviating burdens on taxpayers.
By advocating for changes to the IRS reporting requirement, Sen. Cassidy and his colleagues are seeking to promote fairness and alleviate unnecessary burdens on individuals and businesses, ultimately fostering an environment that supports economic growth and prosperity for all.
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