S-1425-119
Read twice and referred to the Committee on Finance.
Sponsored by Bill Cassidy (R-LA)
What it does
This bill would raise the threshold at which payment platforms like PayPal, Venmo, and online marketplaces must report a user's transactions to the IRS on Form 1099-K, restoring the pre-2021 rule of $20,000 in payments and more than 200 transactions per year (with a modified version requiring both over $10,000 and over 50 transactions). It would also apply this same threshold to backup withholding rules and make the changes retroactive to transactions after December 31, 2024.
Who benefits
Casual online sellers, gig workers, and small-scale side-business owners who use platforms like eBay, Etsy, Venmo, and PayPal and would no longer receive 1099-K forms for modest transaction volumes; payment settlement companies that would face reduced compliance and processing costs for low-dollar accounts; tax preparers whose clients would face fewer confusing informational forms.
Who is hurt
IRS efforts to track previously underreported income from casual online sales and gig work, potentially reducing tax compliance visibility; the federal government, which could see somewhat lower reported income and associated tax collection from small sellers no longer flagged by automatic reporting; taxpayers who rely on 1099-Ks to accurately track their own income may lose that automatic record-keeping aid.
Supporters argue
Supporters argue the 2021 American Rescue Plan's lower $600 threshold swept in millions of casual sellers—people selling used furniture or splitting rent via Venmo—who owed no tax but received confusing IRS forms, creating widespread compliance headaches documented by taxpayer advocates and the IRS itself, which delayed implementation multiple times. They contend restoring the higher $20,000/200-transaction threshold reduces paperwork burden without meaningfully affecting taxpayers who owe money, since the underlying duty to report income is unchanged regardless of the reporting threshold.
Opponents argue
Opponents argue that lowering reporting thresholds was intended to close the tax gap by giving the IRS visibility into income that goes unreported, and raising thresholds back up could allow real income from gig work and online sales to escape scrutiny, disproportionately benefiting people already inclined not to report side income. They contend that automatic information reporting is one of the most effective tools for improving voluntary tax compliance, and weakening it could cost the government revenue that CBO or JCT estimates may quantify.
Constitutional context
This bill exercises Congress's Article I taxing power to define income-reporting mechanics under the Sixteenth Amendment; it does not raise the unresolved realization question from Moore v. United States (2024) since it concerns reporting thresholds rather than the definition of taxable income itself, and no other constitutional provision appears implicated.
Checks and balances
Congress sets the statutory reporting threshold directly in the tax code; the IRS retains authority to write implementing regulations and enforce compliance, subject to the Administrative Procedure Act and judicial review.
Historical precedent
Congress lowered this same threshold from $20,000/200 transactions to $600 in the 2021 American Rescue Plan Act, and this bill would substantially reverse that change.