Section 1 Short title
This Act may be cited as the “Cut Red Tape For Online Sales Act”.
Cut Red Tape For Online Sales Act
A BILL
To amend the Internal Revenue Code of 1986 to increase the de minimis exception for third party settlement organizations to $5,000, and for other purposes.
Sec. 2 Modification of exception for reporting of third party network transactions
Sec. 3 Plain language notice to payees regarding form 1099–K
In general— Section 6050W of the Internal Revenue Code of 1986 is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following:
“(g) Plain language description required—Every person required to furnish a written statement under subsection (f) shall simultaneously issue to the recipient of such statement a plain language notice explaining the contents of such statement, either through using a Form or notice issued by the Internal Revenue Service or by providing a written explanation that is substantially similar in content to plain language on the Form or notice issued by the Internal Revenue Service.”
Effective date— The amendments made by this section shall apply to statements issued in taxable years beginning after the date of the enactment of this section.
Establishment of notice to taxpayers with respect to form 1099–K—
In general— Not later than 90 days after the date of the enactment of this section, the Secretary of the Treasury (or the Secretary’s delegate) shall amend Form 1099–K to include, in plain language, a notice with respect to such Form which—
directs payees to refer to the instructions for such Form to determine if a tax return must be filed,
summarizes rules for taxability of income reported on such Form, including as to under what circumstances—
income reported on such Form may be subject to tax, and
income from personal items sold at a loss or for no gain may not be subject to tax, and
provides a reminder to participating payees that they may qualify for relevant small business deductions.
Regulations and guidance— The Secretary of the Treasury may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this subsection.
Sec. 4 Application of backup witholding with respect to third party network transactions
In general— Section 3406(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(8) Other reportable payments include payments in settlement of third party network transactions only where aggregate for calendar year is $5,000 or more—Any payment in settlement of a third party network transaction required to be shown on a return required under section 6050W which is made during any calendar year shall be treated as a reportable payment only if—
“(A) the aggregate amount of such payment and all previous such payments made by the third party settlement organization to the participating payee during such calendar year equals or exceeds $5,000, or
“(B) the third party settlement organization was required under section 6050W to file a return for the preceding calendar year with respect to payments to the participating payee.”
Effective date— The amendments made by this section shall apply to calendar years beginning after December 31, 2021.
Transitional rule for 2022— In the case of payments made during calendar year 2022, section 3406(b)(8)(A) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by inserting “and the aggregate number of third party network transactions settled by the third party settlement organization with respect to the participating payee during such calendar year exceeds 200” before the comma at the end.