Sen. Bill Cassidy (R-LA) is advocating that changes to a controversial $600 IRS reporting requirement be included in the child tax credit and business tax bill.
The legislation in question has already cleared the hurdle of the Ways and Means Committee, whose members advanced to the broader House in a bipartisan 40-3 vote. The bill faces more uncertain odds in the Senate, where the Finance Committee will first consider the legislation.
The bipartisan tax legislation is a vehicle that could be used to exact other changes, with some in both the House and the Senate hoping that it will alter a 2021 Biden-era law that requires payment platforms such as Venmo and Paypal send 1099-K tax forms to those receiving more than $600 per year.
One such lawmaker is Cassidy, who introduced separate legislation alongside Sen. Sherrod Brown (D-OH) last year to raise that reporting threshold to $10,000. Cassidy is now pushing the committee for his legislative fix to be included in the tax bill, a spokesperson told the Washington Examiner.
“The cap the Biden administration implemented is hurting everyone from small business owners to people just trying to pay their rent,” Cassidy said of the requirement last year.
Notably, given the complexity of the change, the IRS has for two years in a row now delayed its implementation, most recently announcing in November that it would treat 2023 as another “transition year” to cut down on the “potential confusion caused by the distribution of an estimated 44 million” 1099-K forms sent to taxpayers.
There was already a push to get changes to the $600 reporting requirement included on the House side. Reps. Chris Pappas (D-NH), Ann Wagner (R-MO), Tim Burchett (R-TN), and 15 other bipartisan lawmakers sent a letter to House and Ways and Means Committee leadership asking that a fix be included.
“While the IRS has issued a further postponement of the new $600 reporting threshold for payments made in 2023, a long-term legislative fix would provide much-needed certainty for online sellers,” the lawmakers said. “Unless Congress acts, once the current pause expires at the end of this year, millions of Americans will receive new and confusing tax forms for online transactions.”
The tax plan in question came as a result of negotiations between Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR).
The Wyden-Smith plan would expand the child tax credit by increasing the maximum refundable amount per child while changing the calculation of the credit on a per-child basis to make it more generous. It also renews several key tax deductions for businesses, for example, for research and development costs.
While the bill sailed through the Ways and Means Committee and was endorsed by the White House, passage, especially in a fractious election year, is quite uncertain. On Tuesday, Sen. Thom Tillis (R-NC) announced that he opposes the Wyden-Smith bill as currently written, expressing concerns about how it would be paid for.
The legislation would be paid for through changes to the pandemic-era employee retention tax credit, or ERC, which was a tax credit to business owners that encouraged them to keep employees on their payrolls.
The law would move the filing deadline for backdated ERC claims to Jan. 31. Under current law, taxpayers can claim pandemic-related ERC until April 15, 2025. It would also increase monetary penalties for promotors involved in aiding and abetting in the understatement of the tax liability of business owners.
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The Joint Committee on Taxation, Congress’s in-house tax scorekeeper, estimates that the ERC changes would result in just over $77 billion in savings, making the overall bill deficit-neutral. That would not be the case if the provisions are made permanent, though, something that deficit-minded Republicans are wary of.
The bill is written so that its tax cuts sunset in 2025, but if they were instead made permanent, it would cost $645 billion through 2033, according to the Committee for a Responsible Federal Budget, an outside group that advocates lower deficits.