This bill rolls back reporting requirements for gig economy and other independent contractor payments that were expanded by the American Rescue Plan Act. Specifically, it raises the threshold for when payment processors must report third-party transactions to the IRS—requiring reports only when payments exceed $20,000 and involve more than 200 transactions, rather than reporting all payments. The bill applies to gig workers, freelancers, and others who receive income through payment apps and similar platforms. It also clarifies backup withholding rules to align with the higher thresholds, effective for tax years beginning in 2025 and beyond. The sponsors argue this protects small earners from unnecessary tax reporting burdens, though it may reduce IRS visibility into income that some argue should be reported for tax compliance purposes.
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