Many professionals are increasingly earning through apps such as Etsy, Amazon, eBay, Coursera, Udemy, Teachable, Fitbit, MyFitnessPal, Strava, Uber, DoorDash, and Instacart, calling for adjustments in tax laws for this income style.
These continual changes in tax legislation aim to create efficient ways to account for these kinds of earnings, promote transparency, and prevent the evasion or underreporting of income.
Contract workers and freelancers must stay updated with new legislative changes as they will face changes to their tax reporting obligations. New criteria set to come into effect in 2024 will introduce more stringent reporting requirements, possibly including more detailed income breakdowns and tighter submission deadlines.
The upcoming adjustments in tax legislation will modify how independent workers disclose their earnings through 1099-K forms. These changes, however, won’t affect the existing tax rates.
Independent workers and small business owners use 1099-K forms to report third-party app payments exceeding $20,000 or 200 individual transactions.
Adapting tax laws for digital earnings
This threshold is proposed to change as the government requires a 1099-K form for any income exceeding $600 via third-party apps, irrespective of the number of transactions.
According to industry insiders, these changes could benefit both workers and the IRS due to enhanced data collection possibilities, leading to more accurate tax reports. Digital data collection could simplify IRS auditing processes.
Further benefits could include a more straightforward filing process and more precise snapshots of digital businesses’ transactions, making it easier to demonstrate the need for certain deductions and credits.
These changes could bring about a new era of tax legislation predicated on mutual trust, transparency, and accessibility. However, whether the predicted advantages hold true remains to be seen.
