Taxpayers face an additional challenge next year, thanks to the Democrats’ effort to force the $1.9-trillion American Rescue Plan Act (ARPA) of 2021 through Congress using reconciliation. Part of that plan impacts everyday Americans, which led the IRS to issue a warning to early filers.
On November 22, the IRS issued a press release advising taxpayers not to file their upcoming 2022 federal income tax returns early. The notice contained information regarding filing requirement changes created by the passage of the ARPA.
As it turns out, the Democrat’s beloved plan to help workers recover from the economic fallout from the recent pandemic created a new tax wrinkle for working-class Americans. The ARPA decreased the reporting threshold for earnings received from third-party services like PayPal from part-time work and the sale of goods and services.
Previous to the act’s passage, workers were still required to report their income, no matter the amount, but only had to file a form 1099-K with their returns when their total number of transactions exceeded 200 and the total amount for the year exceeded $20,000. However, beginning with the tax year 2022, Americans must file the form if the aggregate amount of their income through third-party services exceeds $600. That means many Americans will receive a 1099-K for the first time next year.
‘Early filers’ should wait to submit their tax return in 2023, the IRS warns. Here’s why https://t.co/YpDOwZCeI3
— CNBC (@CNBC) December 13, 2022
Further complicating matters, PayPal and other services don’t have to provide the form until January 31. As a result, the IRS warned taxpayers to wait until February or March to file their returns. If they do so anyway and later receive a 1099-K, they will likely have to file an amended tax return — undoing their effort to get their taxes out of the way early.