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March 27, 2021, 11:27 a.m. EDT

Gig workers face tax change from Democrats’ $1.9 trillion stimulus package

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By Victor Reklaitis

Gig workers are set to see a tax-related change due to Democrats’ $1.9 trillion COVID-19 aid package, with critics of the shift describing it as burdensome or a “cash grab.”

The change is that starting next year, gig-economy companies will be required to send 1099-K forms to workers who have earned more than $600 in a year, down from prior thresholds of $20,000 a year and 200 transactions.

Supporters of the shift say it’s about helping workers document their income so they can later get Social Security and other benefits.

“This is making the rules fair for these great, big, enormous online platforms, relative to what small businesses already have been doing at a $600 threshold,” said Caroline Bruckner, an expert on the gig economy and managing director of American University’s Kogod Tax Policy Center. She has testified on the issue at congressional hearings.

Bruckner criticized those who have painted the change as levying new taxes on gig workers.

“These are existing taxes that people haven’t been compliant with, because they don’t get these forms,” she told MarketWatch. “Tax research shows consistently that when taxpayers don’t get reporting forms, they don’t properly report their income.”

Rep. Adrian Smith, a Nebraska Republican, has been among the opponents of the change, which is expected to raise $8.4 billion over 10 years. He blasted it in a floor speech last month , as the Democratic-run House and Senate worked to pass the American Rescue Plan Act.

“Now we have learned that bringing this bill to the floor was actually delayed because Democrats were adding a new cash grab — drastically lowering the threshold at which gig workers receive a 1099-K,” Smith said.

Related: What’s next for gig work? Biden administration could bring significant changes

Online platform Etsy Inc. ETSY and the U.S. Chamber of Commerce were among the organizations criticizing the development in a letter last month to top U.S. lawmakers.

“This change would place a burden on small business owners and entrepreneurs,” the letter said .

“We believe there is a time and place to have a robust policy conversation related to 1099K reporting thresholds, however, we encourage Congress to remain focused on supporting small business owners and entrepreneurs in recovering from the devastating impact of the COVID-19 pandemic.”

The shift should help the government get a better grip on the size of the gig economy, according to American University’s Bruckner, who previously worked for Democratic lawmakers.

“There is not a single, reliable, regular measure of gig work and the gig workforce, and this would help to start to develop that understanding,” she said.

This report was first published on March 24, 2020.

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