The IRS will be looking into any transaction of $600 or more starting with your 2022 tax return.
The Internal Revenue Service “cash grab” will zero in on Venmo, PayPal, Etsy, AirBnB, Facebook marketplace and other popular payment services — and hit taxpayers “like a truck,” according to CPA and tax attorney Bruce Willey, the New York Post reports.
Fantasy sports is one area ripe for the IRS picking, maintain Willey and other tax experts.
“Most Americans are about to get run over, and they have no idea,” Willey says. “If they’re not prepared for it, things could get pretty ugly for people.”
The IRS’ new powers aren’t even due to the additional $80 billion and 87,000 new agents. Rather, they stem from the American Rescue Plan Act of 2021 that decreased the threshold amount for third-party settlement organizations (TPSOs) to report to the IRS from $20,000 and 200 transactions, to every single transaction of $600 or more.
President Biden signed the new code change into law in March 2021, now requiring TPSOs to send 1099-k forms to the IRS and users if they meet this lower threshold criteria.
While sports betting is already included in the IRS tax code, the new rule will require sports betting applications like FanDuel and DraftKings that use any of these popular payments systems to comply.
This means that millions of Americans who casually bet on sports or who use payment systems — even to pay for common everyday items such as a child’s college room and board, or to split a dinner tab — will be swept into the expanded IRS reporting system.
“It’s this huge fishing net that’s just going to sweep up a vast amount of people in America,” Willey says.
Therefore, people should keep every receipt, a record of any transaction no matter how casual, and if they bet or invest through these payment systems, monitor their losses to offset their profits or wins, says Jeff Paravano national tax chairman at law firm BakerHostetler and a former senior tax adviser at the Department of the Treasury.
The blizzard of additional information the IRS is going to process is bound to result in errors, experts warn.
To put this in perspective, the IRS currently handles 4 billion individual pieces of information each tax season. The new reporting law will double that to 8 billion returns annually. To process this, the IRS has just launched a 1099 electronic information return portal.
However, instead of ironing out mistakes, the portal is likely to create more discrepancies between individual taxpayers and IRS records, experts warn.
“The fear is that the 1099 will be sent out for things that are not taxable income, and the IRS doesn’t have the capability to easily figure that out,” Paravano says.
He and Willey staunchly believe that the government’s end run is to collect an additional $8.1 billion in taxes from middle- and lower-income Americans over the next decade.
Biden administration officials and Democrats have emphatically argued the beefed-up IRS will only impact those making $400,000 or more.
“That’s a flat lie,” Willey says. “That’s not accurate. They’re lying to you.”
“Legislators are being disingenuous,” Willey continues. “This is one of those things where they say one thing while they are taking your campaign donation and then they turn around and go to Washington and do something completely different.”
The amplified IRS and government policies are bent on a “stealth tax increase,” Willey says.
Get ready for more audits and higher taxes, he adds.
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