Saving Gig Economy Taxpayers Act

- Section 2(b) sets an effective date “as if included in section 9674 of the American Rescue Plan Act,” signaling an intent to treat this restoration as if it had been part of ARPA from the start. That could have retroactive implications for years since ARPA’s enactment, although the IRS has already implemented transitional relief in recent years. Congress or the IRS would likely need to clarify administratively how to handle previously issued forms for past years, if any.

- Section 3 coordinates backup withholding rules with the reinstated de minimis standard. Under IRC 3406, backup withholding (typically 24%) generally applies to “reportable payments” when a payee fails to furnish a correct taxpayer identification number (TIN). The bill would ensure that third-party network payments are treated as “reportable payments” subject to backup withholding only if the payee exceeds both the $20,000 gross amount and the 200-transaction thresholds for the year, with an exception if the prior year’s payments were reportable. This change would apply prospectively to calendar years beginning after December 31, 2024.

Background and context: ARPA’s $600 threshold was intended to improve tax compliance in the rapidly growing platform economy by aligning 1099-K reporting more closely with other 1099 information returns (many of which use a $600 threshold). However, taxpayers owe tax on income regardless of whether they receive a 1099-K, and many casual sellers of personal items often have little or no taxable income (for example, selling used goods at a loss is typically not taxable). After ARPA, concerns emerged that millions of casual sellers would receive 1099-Ks for transactions that were not actually taxable, creating confusion, administrative cost, and increased inquiry volume to the IRS and platforms. The IRS subsequently delayed full implementation, first treating 2022 as a transition year and then further delaying for 2023 and 2024 while floating a $5,000 transitional threshold.

Practical effects if enacted:

- Casual sellers and low-volume gig workers would again be unlikely to receive a 1099-K unless they surpass both $20,000 in gross payments and 200 transactions in a year. That reduces paperwork and the risk of mismatches on returns for taxpayers selling personal items at no gain. It also reduces the likelihood that low-volume users who have a TIN mismatch would be subject to backup withholding.

- Platforms (TPSOs) would have a reporting obligation similar to the pre-2021 regime, substantially lowering compliance and customer-service burdens compared to a $600 threshold.

- The IRS would receive fewer information returns than under ARPA’s $600 standard. While that decreases administrative strain from confused recipients, it also reduces the agency’s visibility into gig and platform income, likely increasing the risk of underreporting among some taxpayers. Historically, third-party reporting significantly improves compliance rates.

- The backup withholding alignment in Section 3 prevents small-dollar, low-volume users from being swept into withholding solely due to a TIN issue, unless they crossed the thresholds or had reportable payments in the prior year. That protects liquidity for small sellers but also further narrows the enforcement lever the IRS would have had under the $600 rule.

- Retroactivity in Section 2’s effective date could create questions about previously issued 1099-Ks or state-level conformity rules. In practice, because the IRS delayed the ARPA threshold, major disruption may be limited, but conforming guidance would still be needed. States that adopted their own thresholds may not change automatically, creating a patchwork.

Who is covered and who is not: The reinstated de minimis rule applies to third-party network transactions processed by TPSOs. Payment card transactions via merchant acquirers (for example, traditional credit card processing for established merchants) remain reportable under the existing rules and are not affected by this bill.

Bottom line: The bill resets the federal TPSO reporting environment to the pre-ARPA status quo and ensures backup withholding rules track that standard. It aims to reduce administrative friction and taxpayer confusion in the casual-seller and low-volume gig markets while accepting a likely tradeoff of reduced third-party reporting and a potential increase in underreported income relative to the ARPA framework. Its fiscal impact would likely be scored as a revenue loss compared to ARPA’s $600 regime, while its compliance impact would be felt most among platforms and taxpayers operating just above or below the old thresholds.