Changes to Reporting Requirements for Gig Economy Workers Delayed by IRS Concerns

In response to growing concerns over tax reporting loopholes, Congress changed the reporting requirements for gig economy workers and independent contractors, with those changes delayed multiple times due to apprehensions raised by the Internal Revenue Service (IRS).

The changes and delays have affected many in Storey and Lyon Counties who work a second or third job to make ends meet.

Previously, gig workers were only required to report gross annual earnings exceeding $20,000 involving more than 200 transactions in a calendar year on Form 1099-K. It created a loophole allowing individuals to earn up to $20,000 without reporting their income.

In 2021, Congress responded to the IRS’s request and lowered the reporting threshold to $600, intending to close this loophole. However, in 2023 and 2024, the IRS postponed implementation because of concerns over potential errors and an influx of more agency paperwork within the agency.

The IRS fears the sudden influx of up to 44 million new 1099-K forms might overwhelm its systems and lead to the issuing of incorrect notices.

The reporting threshold was temporarily increased to $5,000 in 2024 before it reverts to $600 in 2025 to address the concern. Meanwhile, there is ongoing debate about whether this threshold is adequate, with some advocating for an increase to $10,000.

Furthermore, there is continued pushback by those who believe that the lowered threshold of $600 is an abuse by the federal government, which wants to control the number of hours gig workers and independent contractors can work and make. Still, others see the move as a way for the federal government to see what someone is purchasing or why they are receiving the money.

In addition to federal regulations, several states, including Arkansas, the District of Columbia, Illinois, Maryland, Massachusetts, New Jersey, Vermont, and Virginia, have enacted reporting thresholds for Form 1099-K, further complicating tax reporting for gig workers. These thresholds range from $600 to $2,500 and can impact individuals working across state lines.