Pappas, Wagner, Burchett lead bipartisan push to include 1099-K fix in tax package

WASHINGTON, D.C.  – As Congress works to develop a bipartisan tax package, Congressman Chris Pappas (NH-01), Congresswoman Ann Wagner (MO-02), and Congressman Tim Burchett (TN-02) along with fifteen bipartisan colleagues, sent a letter to House and Ways and Means Committee leadership expressing their strong support for the inclusion of a legislative fix for Form 1099-K reporting requirements that threaten to significantly raise bureaucratic hurdles for online sellers in the upcoming Ways and Means markup.

Due to changes in the 1099-K reporting threshold, millions of Americans could be required to report transactions like selling a bike or used clothes online because the threshold for receiving a 1099-K was lowered from $20,000 and 200 transactions to $600. This change did not take into account the millions of individuals selling used or pre-owned items for less than the original purchase price who won’t even be receiving taxable income. Yet these transactions could trigger IRS reporting requirements, causing confusion and ultimately overreporting of income, which could result in mistaken overpayment or ineligibility for certain tax benefits.

The lawmakers wrote: “While the IRS has issued a further postponement of the new $600 reporting threshold for payments made in 2023, a long-term legislative fix would provide much-needed certainty for online sellers. Unless Congress acts, once the current pause expires at the end of this year, millions of Americans will receive new and confusing tax forms for online transactions.”

The lawmakers concluded: “Congress must act to provide a legislative solution and provide millions of Americans with certainty and clarity rather than the status quo of a patchwork of IRS delays, which can add to the confusion associated with this cumbersome tax reporting requirement. We are encouraged that the draft includes increases to other reporting thresholds, including the 1099-NEC and the 1099-MISC, and hope that an appropriate threshold for the 1099-K can be addressed as well. While we might have different perspectives on what the best solution is, we are all in agreement that something needs to be done to permanently address this issue and urge you to include a provision raising the 1099-K reporting threshold in the final bill passed by Committee.”

Background:

In March 2022, Pappas and Congresswoman Cindy Axne (IA-03), introduced legislation to raise the threshold for 1099-K reporting for goods sold on marketplaces to ensure sellers on online marketplaces do not pay more than they owe and limit the amount of personal information they are required to provide online. U.S. Senators Maggie Hassan (NH) and Kyrsten Sinema (AZ) introduced companion legislation in the Senate.

In December 2022,  Pappas and Congressman Ralph Norman (SC-05) sent a joint letter to House leadership requesting immediate bipartisan reform to Form 1099-K reporting requirements. As the leaders continue to craft their end-of-year legislative package, Pappas, Norman, and 27 other Members are urging Congress to raise the Form 1099-K reporting threshold.

In December 2021, Pappas led 15 of his colleagues in a letter to House leadership asking for Congress to raise the threshold for 1099-K reporting for goods sold on marketplaces before the end of the year.

Read the full letter here or below:

The Honorable Jason Smith
Chair
Committee on Ways and Means
United States House of Representatives
Washington, DC 20515

The Honorable Richard Neal
Ranking Member
Committee on Ways and Means
United States House of Representatives
Washington, DC 20515

January 17, 2024

Dear Chair Smith and Ranking Member Neal:

Thank you for your commitment to developing a bipartisan tax package to support American families and small businesses. We write to express our strong support for the inclusion of a legislative fix for Form 1099-K reporting requirements that will significantly raise the current $600 reporting threshold in the upcoming Ways and Means markup.

While IRS has issued a further postponement of the new $600 reporting threshold for payments made in 2023, a long-term legislative fix would provide much-needed certainty for online sellers. Unless Congress acts, once the current pause expires at the end of this year millions of Americans will receive new and confusing tax forms for online transactions. These everyday exchanges could include selling a used textbook to a fellow classmate, posting an old bike online to supplement your income, or reselling clothing from cleaning out your closet. Oftentimes, the seller isn’t even earning any “income” because they spent more on the item than they are selling it for.

Congress must act to provide a legislative solution and provide millions of Americans with certainty and clarity rather than the status quo of a patchwork of IRS delays, which can add to the confusion associated with this cumbersome tax reporting requirement. We are encouraged that the draft includes increases to other reporting thresholds, including the 1099-NEC and the 1099-MISC, and hope that an appropriate threshold for the 1099-K can be addressed as well. While we might have different perspectives on what the best solution is, we are all in agreement that something needs to be done to permanently address this issue and urge you to include a provision raising the 1099-K reporting threshold in the final bill passed by Committee.

Thank you for your attention to this important matter. We look forward to your prompt response.