Yesterday, Congresswoman Carol Miller (R-W.Va) introduced a bill that would repeal burdensome reporting requirements on independent contractors included in the Democrats’ American Rescue Plan. In the Senate, Senator Rick Scott (R-Fla.) has introduced a companion bill, S. 948. ATR urges lawmakers to support and cosponsor the Saving Gig Economy Taxpayers Act.
The American Rescue Plan contained a provision that lowered the reporting threshold to $600 or more for 1099-K reporting and eliminated the transactions threshold. Prior, one was only required to report when there were more than $20,000 in sales and more than 200 transactions in a year. The provision also extended the 1099-K reporting to “specified electronic payment processors.”
This adds significant compliance burdens for freelancers and independent contractors including freelancers compensated via PayPal, Etsy sellers, Airbnb hosts, Uber and Lyft drivers, food delivery couriers, and others participating in the sharing economy.
This provision disproportionately harms low- and middle-income contractors, small businesses, and freelancers, many of which have been devastated by the coronavirus pandemic. Repealing it would protect gig economy workers and small e-commerce sellers, ensuring they are able to maintain the flexibility and reliability of their jobs.
“Congresswoman Carol Miller should be applauded for introducing the Saving Gig Economy Taxpayers Act,” said ATR President Grover Norquist. “This legislation will repeal burdensome 1099-K reporting requirements that Democrats snuck into Biden’s $1.9 trillion COVID-19 spending bill. If lawmakers fail to pass Rep. Miller’s bill, low-and middle-income contractors, small businesses, and freelancers will be slugged with new reporting requirements and paperwork mandates that will result in unnecessary tax complexity.”
Democrats have tried to impose similar 1099 requirements before. It was so unpopular that the requirements were repealed within a year. Democrats last enacted burdensome 1099 reporting requirements in Obamacare, when they required businesses to send 1099 forms for all purchases of goods and services over $600 annually.
Soon after this provision was signed into law, the National Taxpayer Advocate raised concerns that these reporting requirements would cause “disproportionate” harm to small businesses and do little to improve tax compliance.
This provision was so unpopular that it was quickly repealed in 2011 with a bipartisan vote of 87 to 12 in the Senate and 314 to 112 in the House. The Obama administration even hailed repeal of the provision a “big win” for small businesses in a press release:
“Today, President Obama signed a law that removes the expanded ‘1099’ reporting requirement from the Affordable Care Act. This is a big win for small businesses.
The SBA and President Obama supported repealing this provision, which would have required businesses to send 1099 forms for all purchases of goods and services over $600 annually. With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth.”
Hopefully, through Rep. Carol Miller’s bill, the 1099 reporting requirements in the American Rescue Plan will meet the same fate. If they are serious about protecting independent contractors and small businesses from burdensome regulations, lawmakers should support the Saving Gig Economy Taxpayers Act.