The Coronavirus pandemic revived a longstanding debate amongst lawmakers about what unemployment benefits to provide to independent contractors and how to decrease the underreporting of income.
Chairman of the Senate Finance Committee’s Taxation and IRS Oversight Subcommittee, John Thune, believes simplifying tax requirements would ensure that self-employed workers report accurately, pay all taxes owed and qualify for pandemic relief.
Specifically, Thune proposed a plan in S. 700 that requires either a Form 1099-K or Form 1099-MISC to be distributed to self-employed workers when their earnings exceed $1,000. This new, lowered threshold would replace the current 1099-K threshold of $20,000 in earnings and 200 transactions.
Several large online platforms, including Lyft and Airbnb have encouraged Thune’s efforts to lower this threshold and simplify reporting.
Caroline Bruckner, a tax professor at the American University Kogod School of Business, said recent action taken by states to lower their 1099-K reporting thresholds could influence the federal government to follow suit.
In the last six months, the following states have lowered their 1099-K reporting thresholds:
Illinois – $1,000 threshold paid over 4 transactions.
Virginia – $600 threshold and no transactions.
Maryland – $600 threshold and no transactions.
Florida – a no-income tax state where there was no state 1099 reporting changed the law to require the 1099-K to be reported directly at the federal thresholds.
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The new stimulus bill will have impacts on both 1099-K reporting requirements and reporting threshold. If you’re a gig worker or selling through a TPSO, learn how this affects your taxes.
