The Gig Economy Tax Hike Tucked Inside the Relief Bill
Crammed inside the $1.9 trillion “American Rescue Plan” is a tax hike on workers who very likely can afford it least: those working in the gig economy.
According to Ronald Walker at EnteCourier.com:
…7 lines in the 630 page bill will make a huge tax difference for a lot of gig economy workers. HR 1319 section 9674, makes a huge change in when income is reported for what are called third party transactions.
This means that many contractors with gig economy companies like Uber (including Uber Eats) and Lyft will be getting 1099 forms when they previously wouldn’t have.
Those few lines are estimated to raise as much as $8.4 billion in new federal revenue over the next decade.
Writing in Roll Call, Doug Sword notes that current tax law never anticipated the existence, or the growth, of app-based work like Lyft or DoorDash. The Democratic “fix” seeks to correct the perceived problem. But it could end up making matters even worse:
Nina Olson, who ran the IRS’s taxpayer advocate services for 18 years, predicted the estimated tax revenue will prove elusive because many gig workers who are paid by Uber, Lyft, DoorDash, Grubhub, TaskRabbit and the like are living paycheck to paycheck and won’t be able to pay the bill.
“Workers who are underreporting their income now will become guilty of nonpayment next year and subject to penalties and actions by the agency,” Olson said.
Olson added that an IRS collection action “can destroy a person’s life,” as employers can be hesitant to hire someone with a federal tax lien and lenders won’t make loans without charging the highest interest rates.
To a degree, the federal government is playing catch-up with states that require more extensive income reporting.