Gig Economy (Etsy AirBNB Doordash eBay Grubhub) incl COVID Relief Bill Tax Provisions

[Luke]

With folks struggling to survive, adding new tax provisions seems like a rough way to raise revenue. Hope this ends up in the Vote-A-Rama and reconsidered.

Gig workers could end up losers in Covid relief bill
The industry says it’s getting ambushed, complaining it didn’t even know lawmakers were planning the tax crackdown.
By BRIAN FALER 03/05/2021 04:34 PM EST

Airbnb, Etsy and other pillars of the gig economy are shaping up to be rare losers in Democrats’ coronavirus relief package. Buried in the legislation are provisions that will require them to provide a lot more information to the IRS about the money millions of people earn through their platforms, which is likely to bring in billions of dollars more in federal taxes. That will generate cash Democrats can use to reduce the total cost of their stimulus plan.

But the industry says it’s getting ambushed, complaining it didn’t even know lawmakers were planning the tax crackdown until shortly before it was approved last week by the House. Company officials worry that asking people for their Social Security numbers — which the companies will need to produce the tax documents — and raising the specter of the IRS will scare many away from their platforms.

“We’re concerned that the proposal could unintentionally dissuade many casual and one-time sellers, who could be forced to share their Social Security number with online platforms before listing anything for sale,” said a spokesperson for Etsy. That could “turn away would-be entrepreneurs at a time when many desperately need the extra income.”

It’s not entirely clear who pushed for the provisions, though efforts to require more reporting by the industry aren’t new. A spokesperson for the tax-writing House Ways and Means Committee did not respond to a request for comment. The wrinkle comes as Senate Democrats debate the stimulus plan, which lawmakers aimed to get to President Joe Biden’s desk by March 14, when expanded jobless benefits expire. Much of the focus on the stimulus has been on its winners, though there would be a few losers as well.

For those in the sharing economy, the issue is provisions that would dramatically reduce the threshold at which companies like eBay, GrubHub, Doordash and others would have to report to the IRS the earnings of people who use their platforms to make money. The users would also have to be given the information. Currently, that’s only necessary when someone earns more than $20,000 through at least 200 transactions. Democrats would drop that to anyone earning more than $600, regardless of the number of transactions. That’s projected to generate a lot of money — $8.4 billion over the next decade, according to an official forecast — because people are more likely to pay taxes on their earnings when they know someone else is telling the IRS how much they made.

https://www.politico.com/news/2021/03/0 ... ers-473902

[humblescribe]

Orly,

I gotta say something in support of this proposed legislation. The Code is abundantly clear: All income is taxable unless it is specifically excluded. Not everyone that I perform services for issues me a 1099 because my bills are beneath the $600 threshold or because they are not in business--it is a personal, non-deductible expense. Our "voluntary" system of taxation would collapse if we only had to pay income taxes on what is reported to the IRS or other authorities.

I've been in this dodge for over forty years. I've had many discussions about reporting tip income. Most tip recipients resent paying income taxes on their tips. Their reasons vary; but they are unanimous in reporting as little as they think they can get away with. There is no difference between earning $18,000 on a W-2 plus another $20,000 in tips during the year as opposed to the janitor who makes $38,000 all on a W-2. Similarly, there is no difference between a person who rents a small space to a business and receives a 1099 for $2,400 or an airbnb person who rents out their mountain cabin for a couple of weekends for the same amount and receives no tax form.

The $20,000/200 transactions rule was put into place about 10 years ago or so. It was intended for credit card companies to report sales via credit card so the thresholds were set high enough so as not to inconvenience them for someone who made casual sales. There used to be a form 1099-K for these things, but it may have become obsolete--I haven't seen one for several years.

Finally, just to throw salt into the wound: Gains are always taxable on your 1040, but personal losses are non-deductible. So, when someone who scavenges garage and estate sales looking for deals and turns around and sells them on Ebay for a profit, that is taxable. If sold at a loss, non-deductible. Instead, if a taxpayer makes googaws or items of that elk and sells them on Ebay, those sales are taxable too. If the enterprise shows a profit, then the taxpayer will have to pay SE tax on the profit. Then we get into the hobby loss arena, whereby all income is taxable, but expenses are only deductible as a miscellaneous itemized deduction. That deduction vanished with the former guy's tax cuts and jobs act in 2017. So, yes, the taxpayer will get hosed in this instance.

I empathize with these folks. But they are not being singled out. Congress wants to level the playing field, as it were, for the vast underground economy. And trust me, with all the swap meets, farmers markets, and internet trading sites, that economy is yuge.

[northland10]

I am in the gig economy but in a really tiny fashion. I do report though I may have missed a wedding or funeral here or there (don't tell the IRS). Obviously, those amounts are tiny.

I will have nothing to report from 2020 as I had no weddings or funerals, as one might imagine. I do have a wedding coming up now that we are reopening in-person for small, under 25 people, pastoral services (weddings and funerals). I will probably have a funeral or two to make up when we are back up and running. For all the pandemic, we have had few deaths in the parish family this last year.

I may have around 3 leftovers to play once we are back. One of them, the decedent passed before the pandemic and the funeral was originally intended for the end of April 2020. We said we could probably work something out to stream the service but he wants to wait until everybody can come back. So be it.

[Lani]

$600 is pretty low for resale places like ebay, bonanza, poshmark, etc. Oh, and craigslist. Especially since Covid, yard sales, moving sales, etc. are mostly on line. And, of course, sold at a loss. Most of my Alz Asso fundraiser was on craigslist & ebay. (Also, clothes that don't fit, handbags I don't use any more, etc.)

Guess I better start on the next one ASAP before this goes into effect!

[northland10]

$600 is pretty low for resale places like ebay, bonanza, poshmark, etc. Oh, and craigslist. Especially since Covid, yard sales, moving sales, etc. are mostly on line. And, of course, sold at a loss. Most of my Alz Asso fundraiser was on craigslist & ebay. (Also, clothes that don't fit, handbags I don't use any more, etc.)

Guess I better start on the next one ASAP before this goes into effect!

600 would be about 4 funerals and 2.5 weddings or so. Weddings are often more as there is more complex music to play, extra rehearsals, etc. Funerals are cheaper because there is no mother of the bride (hazard pay).

[Lani]

ECommerceBytes has an article about the tax change.

A provision the 2021 Rescue Plan Act would lower the threshold considerably - it would require companies to send a 1099K to sellers for whom they've processed over $600, period. In our reading of the bill's language, it appears if you sell $601 worth of items, even in a single transaction, the payment processor is required to file Form 1099K.

The provision amends Section 6050W of the IRS tax code article - the relevant language is contained in Section E:
"(e) De Minimis Exception For Third Party Settlement Organizations. - A third party settlement organization shall not be required to report any information under subsection (a) with respect to third party network transactions of any participating payee if the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions does not exceed $600."

Good news: "The amendment ... shall apply to returns for calendar years beginning after December 31, 2021."

The bad news is I better get going on sell off everything I won't take with me to Oahu.

[zekeb]

I noticed the word "companies." From this I presume that person to person sales are exempt. Of course if you sell through Ebay and such, a 1099K will be sent.

[jcolvin2]

Lowering the threshold to $600 makes it consistent with the $600 threshold for Forms 1099-Misc. I think Democrats saw this as leveling the playing field between service workers who get paid by businesses for providing services directly to them to them, and those service workers who get paid through these platforms for providing services to others.

The bill certainly imposes significant record keeping and reporting requirements with respect to casual participants. However, as a tax lawyer, I feel obliged to echo humblescribes’ reminder that taxation is not dependent on the receipt of a form.

[RTH10260]

Minneapolis drivers protested wages – and won. Lyft and Uber are choosing to leave the city rather than pay up
Groups of drivers backed a bill setting minimum pay, but the two tech companies say it’d make riders’ fees unsustainable

Michael Sainato
Wed 20 Mar 2024 12.00 CET

Uber and Lyft claim they will cease operating in the Minneapolis area in protest of a minimum pay ordinance that the city council voted to approve last week.

The bill, to go into effect on 1 May, would establish a minimum pay of $1.40 per mile and $0.51 cents per minute for rideshare drivers, with a $5 per ride minimum. The city council voted to override the mayor’s veto of the ordinance, prompting Uber and Lyft to threaten to leave the region in response.

Minneapolis would be the only city in the US without Uber and Lyft services if the rideshare companies uphold their threat to cease operations on 1 May.

The legislation was backed by groups of rideshare drivers over low pay and high costs amid reports their pay has been declining.

Eid Ali, a rideshare driver for nine years and president of the Minnesota Uber and Lyft Drivers Association dismissed claims from Uber and Lyft that the minimum pay is too high and would make passengers’ fees unsustainable.

“I refuse to believe a $7.3bn company [Lyft] cannot pay their workers minimum wage in our city. That is so difficult for me to swallow,” said Ali. “Every worker has the right to be paid a living wage.”

Ali said if Uber and Lyft ultimately leave, they would only be taking software with them and claimed other startups, companies and taxi cab companies have already expressed interest in trying to replace them.

“The drivers are here. Their cars are here. They’re not leaving,” said Ali. “Why I think they’re doing this is if they let the drivers here get what they want in this small market, it will have a bigger effect on their bigger, more lucrative markets. So they have to stop this. That is what their fight is based on. It’s not about the minimum wage, I believe it’s about how it will impact their bigger markets.”

Farhan Badel has worked as a driver for Uber and Lyft since 2018 said he enjoys working as a rideshare driver, but that he felt their role in society was severely undervalued.

He claimed that rideshare driver compensation in the area has declined in recent years, noting that the takeaway pay for driving a common route from the airport to the Mayo Clinic has dropped significantly. Badel argued he has been working longer hours and getting paid less than he did years ago and that the rideshare apps have been exploiting rideshare drivers who are predominantly from immigrant communities in the Minneapolis area.

“Uber and Lyft, it seems they want to turn this into riders versus drivers, but the reality is a lot of the riders understand that they are overpaying, they’re getting overcharged, while we’re getting underpaid. That’s what our struggle is,” said Badel. “All we’re asking for is fair compensation. They decide what to charge the riders, we don’t have control over what they charge the riders. All we’re asking for is a fair wage. If they’re charging the rider $90 and only giving us $20, that is what they’re fighting against.”



https://www.theguardian.com/us-news/202 ... nimum-wage

[AndyinPA]

If you have to have obscene profits and can't pay a living wage, you don't deserve to be in business. End-stage capitalism.

[Suranis]

I've been reading a bit about Adam Smith, the writer of "the Wealth of Nations" recently. The Liberal ideas of "Free Market Capitalism" are based very much on that book. I believe he would be horrified by stuff like this.

[northland10]

If you have to have obscene profits and can't pay a living wage, you don't deserve to be in business. End-stage capitalism.

I wouldn't call it end stage since this was the capitalist mentality of the late 19th century. They want to return to that period.