(PatriotWise.com) – New Internal Revenue Service rules will likely increase both taxes and audits for many Americans, especially those who use transaction services like Paypal and Venmo for fantasy sports, some tax experts warn.
The 2021 American Rescue Plan amended a code section to decrease the minimum threshold for reporting by third-party settlement organizations from $20,000 a year for 200 or more transactions to only $600 a year regardless of the number of transactions.
The code change, passed by Democrat lawmakers and signed by President Biden in March 2021, will require third-party settlement organizations like Venmo, PayPal, and Etsy to send 1099-k forms to the IRS and to recipients whose transactions exceed $600 in a year.
If a sports betting app like FanDuel or DraftKings uses a payment system, taxpayers will face additional taxes there even though sports betting is already included under the current tax code.
Bruce Willey, a CPA and tax attorney told Fox News last week that the changes imposed by the IRS are so broad that they amount to one of the largest “cash grabs” by the federal government in recent memory that will hit taxpayers “like a truck.”
While the IRS, lawmakers, and the Biden administration have pushed back on the claim that the changes would hurt Americans earning less than $400,000, Willey said they are “being disingenuous.”
He told Fox that this is another example of saying one thing while campaigning for office and doing “something completely different” after getting to Washington. Willey said it is a “flat lie” to claim that nobody making less than $400,000 a year would face an increased chance of getting audited or paying more taxes. “They’re lying to you,” he told Fox.
Willey described the changes as a “stealth tax increase” and said it is a “fantasy world” to think the changes won’t lead to an increase in audits and taxes, even on those who have no increased taxable income.
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