Bearing The Brunt: Americans Left Reeling By Harsh New Tax Laws

EDITOR NOTES: As the nation grapples with the complexities of an evolving tax landscape, Republicans are sounding the alarm, warning that Americans are ill-prepared to shoulder the burden of new tax laws. This timely analysis delves into the intricacies of these recent legislative changes and the potential consequences for taxpayers who may find themselves struggling to adapt. By examining the underlying motives, potential pitfalls, and impact on everyday citizens, this piece offers an essential exploration of the challenges posed by these new tax laws and the urgent need for awareness and guidance to help taxpayers navigate the uncertain road ahead.

 

With Tax Day looming just days away, two Republicans on the House Ways and Means Committee are warning that neither the IRS nor the American people are prepared to shoulder the burdens imposed by new reporting requirements.

Voicing their concerns in an April 4 letter (pdf) to Government Accountability Office (GAO) Comptroller General Gene Dodaro, Ways and Means Committee Chairman Jason Smith (R-Mo.) and Oversight Subcommittee Chairman David Schweikert (R-Ariz.) asserted that the amount of paperwork and tax preparation required to comply with new rules and regulations will be unmanageable for all involved.

“In Fiscal Year 2021, the Internal Revenue Service (IRS) received over 4.7 billion information returns—reports provided to the IRS to track business or trade payments and transactions—filed by third parties, most of which were filed electronically,” the lawmakers noted. “In addition, recent legislation drastically lowered the threshold to $600 for reporting certain types of payments, such as those made using a third-party platform like PayPal or Venmo. New regulations related to information reporting for transactions occurring across these digital assets could lead to the filing of billions more information returns.”

The new $600 reporting threshold was implemented through the American Rescue Plan Act of 2021, which passed along party lines in both Democrat-controlled chambers of Congress.

Under previous law, platforms like PayPal and Venmo were only required to report a user’s transactions to the IRS if, over the course of a year, the individual completed more than 200 commercial transactions and made more than $20,000 in payments.

Although the new requirement was initially set to impact 2022 filings, the IRS announced in December that it would delay implementation of the rule for one year to “help smooth the transition”—a move the congressmen characterized as a “tacit acknowledgement” of the burden the rule imposes on taxpayers and IRS employees alike.

“Processing this large amount of information is already a significant undertaking at the IRS—an agency that has struggled to modernize or adequately exercise its customer service responsibilities,” the Republicans noted. “As such, the extent to which the IRS uses, or can even process, third-party information to identify and prevent fraud and noncompliance through its matching and other compliance programs is of particular interest.”

Backlog

Since 2020, the IRS has been working to reduce a backlog of paper returns and taxpayer correspondence, which the agency has attributed to the COVID-19 stimulus payments and staff shortages. That backlog resulted in the agency’s March 2021 decision to destroy roughly 30 million paper-filed information return documents.

Originally published by: Tyler Durden on ZeroHedge