Republicans’ SNOOP Act & Democrats’ Cut Red Tape for Online Sales Act would change 2023 tax reporting requirement on $600+ Venmo, PayPal earnings
This could even affect President Joe Biden’s secret Venmo account that BuzzFeed News found.
Context
Starting next year, third-party digital payment systems like Venmo, PayPal, CashApp, and Zelle must issue a tax form for customers who earn more than $600 a year through such platforms.
Officially, these customers were supposed to self-report such money to the Internal Revenue Service (IRS) all along. In practice, though, many of them weren’t. So Congress added the reporting provision in March 2021’s American Rescue Plan Act, the $1.9 trillion legislation ostensibly primarily focused on Covid relief.
The provision went relatively unnoticed at first, both because the bill was 242 pages and because the provision won’t take effect until tax reporting time in 2023. But as tax reporting for 2022 enters its final sprint, the upcoming provision is attracting increased criticism from both Republicans and Democrats, the party which almost unanimously supported the overall legislation despite some Democrats objecting to that particular part.
What the bills do
Two similar legislative ideas from opposite parties would change this upcoming tax reporting provision.
Democrats’ Cut Red Tape for Online Sales Act would raise this IRS reporting requirement threshold from $600 to $5,000. The House version was introduced on March 15 as H.R. 7079, by Rep. Chris Pappas (D-NH1). The Senate version was introduced the same day as S. 3840, by Sen. Maggie Hassan (D-NH).
Republicans’ SNOOP (Stop the Nosy Obsession with Online Payments) Act would discontinue the reporting requirement entirely. The Senate version was introduced on February 1 as S. 3546, by Sen. Bill Hagerty (R-TN). The House version was introduced a month later on March 3 as H.R. 6913, by Rep. Michelle Steel (R-CA48).
What supporters say
Supporters argue that the legislation hurts middle-class and working-class people who earn some extra money through such payment services — such as, hypothetically, someone who performs at a piano bar on weekends and accepts song requests with tip money via Venmo.
“Government is too big and has no business involving itself in every corner of Americans’ lives,” Rep. Steel said in a press release about the Republican legislation. The proposal would “ensure that Americans can continue to live their lives without a distant bureaucrat in Washington, D.C. looking over their shoulder every time they participate in the mobile or digital economy.”
“Selling online has empowered Granite Staters to supplement their income… by connecting with buyers online,” Rep. Pappas said in a press release about the Democratic legislation. “Raising the reporting threshold will ensure sellers… are not subject to burdensome or confusing reporting requirements, which could result in overpayment as well as ineligibility for certain tax benefits.”
What opponents say
Opponents counter that the tax reporting requirements aren’t the burden some make them out to be, but rather add another layer of IRS vigilance to ensure the taxes which were already supposed to be paid are, indeed, paid.
“We see third-party information reporting as providing both a service to compliant taxpayers, through accurate and reliable reports that match what the IRS receives, and improving fairness as compliance increases and better-informed enforcement actions are possible,” IRS Commissioner Charles Rettig wrote in a September letter to the House Ways and Means Committee.
“Importantly, improved information reporting could result in decreasing audits of compliant taxpayers, saving those taxpayers time and money and increasing efficiency for the IRS,” Rettig continued. “The reason is simple: the more transparent a taxable event is to the IRS, the more likely the event is to be accurately reported and proper taxes are to be paid. This is in large part because whenever the IRS implements new information reporting requirements, voluntary compliance rises.”
Odds of passage
The Democratic legislation has attracted one Democratic House cosponsor and one Senate Democratic cosponsor. It awaits a potential vote in either the House Ways and Means or Senate Finance Committee.
The Republican legislation has attracted 16 Republican House cosponsors and 12 Senate Republican cosponsors. It awaits a vote in either of those same two committees. Odds of passage are low in the Democratic-controlled Congress.
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This article was written by GovTrack Insider staff writer Jesse Rifkin.
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