The "Saving Gig Economy Taxpayers Act" raises the reporting threshold for third-party payment processors to over $20,000 and more than 200 transactions, and applies a de minimis rule to backup withholding for third-party network transactions.
Carol Miller
Representative
WV-1
The "Saving Gig Economy Taxpayers Act" restores the previous, higher reporting threshold for third-party payment processors, requiring them to report users' income to the IRS only if it exceeds $20,000 and involves more than 200 transactions. This change is retroactive to the American Rescue Plan Act and also introduces a de minimis rule for backup withholding, applicable from 2025, to reduce unnecessary tax reporting for gig workers and small online sellers.
Gig Economy Tax Relief Bill Reinstates $20,000/200 Transaction Reporting Threshold
This bill, the "Saving Gig Economy Taxpayers Act," rolls back a recent change to tax reporting rules affecting folks earning money through online platforms and payment apps. Specifically, it reinstates the older, higher threshold for when third-party payment processors (like PayPal, Venmo, or Etsy) need to send users and the IRS a Form 1099-K. The key change is retroactive, applying as if the lower threshold introduced by the American Rescue Plan Act never happened.
Back to the $20K Rule
Remember the confusion about getting a tax form if you sold some old furniture online or got paid for a side hustle via an app? The American Rescue Plan Act lowered the reporting trigger to just $600, regardless of the number of transactions. This bill (Sec. 2) says "forget that" and brings back the previous standard: reporting is only required if someone receives over $20,000 and has more than 200 transactions in a year through a single platform. For many casual sellers, freelancers, and gig workers, this means less paperwork and potentially less confusion come tax time, as platforms won't be required to issue 1099-Ks for smaller amounts.
Easing Up on Backup Withholding
Beyond the 1099-K reporting, the bill also adjusts rules around backup withholding (Sec. 3). Backup withholding is when a payment processor is required to withhold income tax (currently at 24%) from payments if the IRS doesn't have a correct taxpayer identification number or if certain other conditions apply. This act aligns the withholding rules with the higher $20,000/200 transaction reporting threshold. Starting after December 31, 2024, payments generally won't be subject to backup withholding unless they meet that higher threshold. There's a catch, though: if payments to someone were reportable in the previous year (meaning they likely hit the threshold then), this new relief might not apply. This aims to prevent unnecessary withholding from smaller-scale gig work or online sales, helping keep more cash flowing for those users.