Wagner, colleagues support legislative solution for Form 1099-K reporting rules

U.S. Rep. Ann Wagner (R-MO) joined a bipartisan contingent of lawmakers in urging the U.S. House Ways and Means Committee to include a Form 1099-K reporting requirements solution in an upcoming tax package to protect millions of Americans selling used or pre-owned items online.

“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,” Rep. Wagner and her colleagues wrote in a Jan. 17 letter sent to committee leaders.

Due to changes in the 1099-K reporting threshold, millions of people soon could be taxed for 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, according to their letter, which U.S. Rep. Chris Pappas (D-NH) also signed.

The reporting change did not take into account those individuals selling used or pre-owned items for less than the original purchase price who won’t be receiving taxable income, they wrote, yet these transactions could trigger IRS reporting requirements that cause confusion and over-reporting of income, which then could result in overpayment or ineligibility for certain tax benefits.

“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,” wrote Rep. Wagner and the members. “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 noted they are encouraged that the draft tax package 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 the ideal reporting threshold level,” they wrote, “we agree 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.”