A few hundred pages into the latest $1.9 trillion Covid relief law, the “American Rescue Plan Act of 2021,” you’ll find Section 9674. It says that a “third party settlement organization” does not have to report to the Internal Revenue Service (IRS) any payments to contract workers under $600.
These third parties include Uber, Airbnb, Etsy, eBay, Freelancer, and other platforms which facilitate payments to gig workers. The problem is that this little amendment lowers the reporting threshold from $20,000 to $600. Previously, a gig worker could earn up to $20,000 on these platforms without the IRS being informed of their income.
What this means:
From this rule change the IRS expects to collect an additional $1 billion annually, presumably from the poorest gig workers who previously earned under $20,000 per year. These low earners previously flew under the radar.
But now they could be met with surprise bills from the tax man when it comes time to file. And as many of these contractors are living paycheck to paycheck, they may incur additional IRS penalties if they are unable to pay what the IRS says they owe.
Of course, the same politicians who snuck this into the bill are the ones who declared over and over that their tax policies would only affect millionaires and the ultra wealthy. But now, one of the first things they do is shake down the lowest tax bracket.
We hope these gig workers enjoy their stimulus checks. They are soon going to learn that nothing is free when it comes to the government. There are always strings attached.