The Virginia legislature recently passed legislation which makes significant changes to the reporting obligations of gig economy participants and specifically third-party settlement organizations (TPSOs).
SB 211 stipulates that TPSOs must issue Form 1099-K to report payments made to their payees. And TPSOs must report payments made to participating payees with a Virginia address if those payments are greater than or equal to $600. This new threshold significantly lowers the Virginia reporting threshold when compared to the federal threshold for information reporting on Form 1099-K. Federally, TPSOs are required to report payee activity that exceeds $20,000 and 200 transactions.
Impacts of SB211
SB 211 is effective July 1, 2020, applicable to payment transactions made on or after January 1, 2020 with reporting due in April 2021. As a result, gig economy participants and TPSOs will likely see an increase in tax information reporting activity moving forward.
The Virginia Department of Taxation provides further detail on SB 211 via a 2020 Fiscal Impact Statement. SB 211 is estimated to have a positive revenue impact of $10 million in FY 2021 and $20 million in FY 2022. This bill will result in increased reporting in the state, and will likely lead to an increase in taxpayer compliance.
Other states with lowered thresholds
Virginia is the most recent state to update their reporting thresholds for information reporting related to TPSOs. Below are a list of others and their corresponding thresholds:
- MA: $600 and 0 Transactions
- DC: $600 and 0 Transactions
- MS: $600 and 0 Transactions
- VT: $600 and 0 Transactions
- NJ: $1,000 and 0 Transactions
- AR: $2,500 and 0 Transactions
- IL: $1,000 and 4 Transactions (starting TY2020)
- VA: $600 and 0 Transactions
- CA: Pending Legislation
Learn more about the change at the Virginia Legislation Information System website.
