November 21, 2022
Dear Chairman Wyden and Neal and Ranking Member Crapo and Brady:
Independent Women’s Voice fights to enhance people’s freedom, opportunities, and well-being. We
write to you today urging you to fix a tax issue that is needlessly burdening lower and middle-income
Americans, especially women, with complex and confusing tax reporting requirements.
E-commerce and online marketplaces are lifelines for individuals looking to maintain their quality of
life, pursue hobbies, or turn their passions into income-generating opportunities. With inflation near a
40-year-high, Congress should encourage new ways for Americans to make ends meet, especially
those that lead to entrepreneurship and independence.
Women benefit tremendously from engaging in e-commerce and online marketplaces. Moms sell pre-
owned clothing and toys that their children have outgrown to generate extra cash for the family. Old
items such as bikes, furniture, and electronics can find new homes rather than ending up in landfills
thanks to the online resale market. Even tutoring neighbors’ kids or delivering food via apps can
provide flexible and steady income.
These individuals are not big businesses and are not likely generating taxable income, but are often
casual sellers. In a survey of casual sellers conducted by the 1099-K Fairness Coalition, 89% said
online selling is not their primary income source and 86% said they made less than $5,000 gross from
items sold in 2021.
These individuals stand to suffer economic hardship from new IRS reporting requirements. When
Congress passed the American Rescue Plan (ARP) in 2021, it approved a provision that altered the
reporting rules for IRS Form 1099-K. This form is intended for credit cards and other third-party
payment processors to report to companies the income that flows from customers and to businesses.
Previously, a Form 1099-K was issued only if a business charged customers at least 200 times in a
year and $20,000 in total. ARP eliminated the 200 transaction threshold and lowered the dollar
threshold to just $600. Consequently, millions of individuals will now have to report such income when
they file their taxes for the 2022 tax year in 2023. They will receive Form 1099-K from the
marketplaces which facilitated any transactions.
This new reporting requirement introduces new complexity to the tax situation of many people
triggering confusion. Tax filers may not know how to report the sales or over-report income leading to
inaccurate filings. The Congressional Research Service (CRS) warned in a report: “Increasing
information reporting for payment settlement entity transactions may increase tax complexity…
Taxpayers who typically have relatively simple tax situations may not know how to report this
transaction on their income tax return while also claiming the correct deduction for it.”
The new reporting threshold will also cause many people financial issues. Nearly 40% of casual
sellers said the change poses an economic hardship to them and of these three out of four (74%)
said they sell online to help pay for necessary personal expenses. If a taxpayer ignores Form 1099-K
on their tax return, they could be taxed for the full amount reported on the 1099-K, even if they sold at
a loss.
The CRS predicts that the IRS will expend added resources adjusting tax filings to fix errors caused
by this reporting requirement. The IRS is already struggling with unprocessed returns and other
issues.
This tax reporting issue was avoidable but thankfully, it is correctable. Congress should restore the
original $20,000 threshold or one significantly higher than $600. There are several bipartisan bills that
aim to do that. The lame-duck session is the perfect time to fix this issue to prevent unwarranted tax
bills and economic burdens next tax filing season.
We urge lawmakers to raise the reporting threshold before the 2023 tax filing season begins to
correct this wrong.
Respectfully,
Patrice Onwuka
Director, Center for Economic Opportunity
Independent Women’s Voice