(DailyDig.com) – The Internal Revenue Service (IRS) is seeking to earn a bit of money from Internet sales. Hobbyists and others earning income on the Internet may be in for a rude awakening as the IRS is requiring them to report anything more than $600 in profit for the year. How is this going to impact those utilizing third parties to earn their money?
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First, let’s talk about how this rule actually changes nothing. The IRS has always required people to pay taxes on any source of income. The only difference is that Uncle Sam is lowering the threshold for reporting. The new law, which Congress snuck into the American Rescue Plan in 2021, will require payment platforms like PayPal or Venmo to report on users making over $600.
Business owners like Bob Eisel of D and E Collectibles and Jeremy Fairgrieve, owner of Pop Culture Connection, agree that the tax revision won’t have much of an impact on them. Instead, they believe the people who will really feel the impact of the new tax law are those who sell valuable items, but only as a side-job or as a way to make supplemental income. Anyone selling collectibles will have to report the added income to the IRS and pay taxes on it if it exceeds $600 for the fiscal year.
The IRS is trying to do its best to make it difficult for people to avoid reporting their incomes. According to the Philadelphia Inquirer, the US Department of Treasury estimates a tax gap of around $600 billion per year. This tax gap is the difference between the estimated taxes owed and the amount the IRS actually collects. The Deputy Assistant Director for Economic Policy, Natasha Sarin, claims the difference could accumulate to around $7 trillion over the next 10 years.
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