New IRS rules mean those who made more than $600 online could owe taxes next year

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New IRS rules mean those who made more than $600 online could owe taxes next year

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Independent contractors will be required to document online income that exceeds $600 in a single transaction starting next year, the Internal Revenue Service said Tuesday.

New rules from the IRS dictate that income earned through online portals such as Uber, Etsy, DoorDash, and Airbnb that exceeds $600 in one transaction now have to be reported to the government on a 1099 form for tax purposes.

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“The IRS cautions people … who may be receiving a Form 1099 for the first time — especially ‘early filers’ who typically file a tax return during the month of January or early February — to be careful and make sure they have all of their key income documents before submitting a tax return,” the IRS said. “A little extra caution could save people additional time and effort related to filing an amended tax return.”

Previously, independent contractors who completed more than 200 transactions through online portals or made more than $20,000 in a year through online platforms were required to report the money on the 1099 tax form. The 2021 American Rescue Plan pandemic relief bill passed by Democrats and signed by President Joe Biden changed the reporting requirements.

The new rules could affect millions of taxpayers who did not treat their online work like a real job. Nearly 1 in 4 people have made money through the gig economy, for instance by selling things online, renting their homes, or using a digital platform as a side job, according to Pew Research.

Gig workers who receive the 1099 form can deduct some costs from their taxes as business expenses. These include some of the costs of gas, car maintenance, and even cellphone bills for those who drive for Lyft or DoorDash, as long as there are documents, such as receipts or bills, to prove the costs. Those who sell items online can document how much they initially paid for an item through receipts and write off storage costs, tax experts told CBS News.

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Although the new rules are set to go into effect in 2023, the government is experiencing pushback from a coalition of companies, including Airbnb, eBay, Etsy, PayPal, and Poshmark, dubbed the “Coalition for 1099-K Fairness,” which is lobbying for Congress to relax the $600 reporting rule. Members of the House of Representatives last week also asked the IRS to delay the reporting rule for one more year, but it is unclear if a delay would be approved with just a few weeks left in the session.

© 2022 Washington Examiner

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