Cut Red Tape For Online Sales Act

I 118TH CONGRESS 1ST SESSION H. R. 3530 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. IN THE HOUSE OF REPRESENTATIVES MAY 18, 2023 Mr. PAPPAS (for himself and Mr. KILDEE) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to increase the de minimis exception for third party settlement orga- nizations to $5,000, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Cut Red Tape For 4 Online Sales Act’’. 5 VerDate Sep 11 2014 23:22 Jun 12, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3530.IH H3530 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 3530 IH SEC. 2. MODIFICATION OF EXCEPTION FOR REPORTING OF 1 THIRD PARTY NETWORK TRANSACTIONS. 2 (a) IN GENERAL.—Section 6050W(e) of the Internal 3 Revenue Code of 1986 is amended by striking ‘‘exceed 4 $600’’ and inserting ‘‘equal or exceed $5,000’’. 5 (b) EFFECTIVE DATE.—The amendment made by 6 this section shall apply to returns for calendar years begin- 7 ning after December 31, 2021. 8 SEC. 3. PLAIN LANGUAGE NOTICE TO PAYEES REGARDING 9 FORM 1099–K. 10 (a) IN GENERAL.—Section 6050W of the Internal 11 Revenue Code of 1986 is amended by redesignating sub- 12 section (g) as subsection (h) and by inserting after sub- 13 section (f) the following: 14 ‘‘(g) PLAIN LANGUAGE DESCRIPTION REQUIRED.— 15 Every person required to furnish a written statement 16 under subsection (f) shall simultaneously issue to the re- 17 cipient of such statement a plain language notice explain- 18 ing the contents of such statement, either through using 19 a Form or notice issued by the Internal Revenue Service 20 or by providing a written explanation that is substantially 21 similar in content to plain language on the Form or notice 22 issued by the Internal Revenue Service.’’. 23 (b) EFFECTIVE DATE.—The amendments made by 24 this section shall apply to statements issued in taxable 25 VerDate Sep 11 2014 23:22 Jun 12, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3530.IH H3530 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 3530 IH years beginning after the date of the enactment of this 1 section. 2 (c) ESTABLISHMENT OF NOTICE TO TAXPAYERS 3 WITH RESPECT TO FORM 1099–K.— 4 (1) IN GENERAL.—Not later than 90 days after 5 the date of the enactment of this section, the Sec- 6 retary of the Treasury (or the Secretary’s delegate) 7 shall amend Form 1099–K to include, in plain lan- 8 guage, a notice with respect to such Form which— 9 (A) directs payees to refer to the instruc- 10 tions for such Form to determine if a tax re- 11 turn must be filed, 12 (B) summarizes rules for taxability of in- 13 come reported on such Form, including as to 14 under what circumstances— 15 (i) income reported on such Form 16 may be subject to tax, and 17 (ii) income from personal items sold 18 at a loss or for no gain may not be subject 19 to tax, and 20 (C) provides a reminder to participating 21 payees that they may qualify for relevant small 22 business deductions. 23 Such notice shall be similar in form to the Notice to 24 Employee included in Form W–2 (as in effect on the 25 VerDate Sep 11 2014 23:22 Jun 12, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3530.IH H3530 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 3530 IH date of the enactment of this Act) and shall also be 1 issued as a stand-alone flier. 2 (2) REGULATIONS AND GUIDANCE.—The Sec- 3 retary of the Treasury may prescribe such regula- 4 tions or other guidance as may be necessary or ap- 5 propriate to carry out this subsection. 6 SEC. 4. APPLICATION OF BACKUP WITHOLDING WITH RE- 7 SPECT TO THIRD PARTY NETWORK TRANS- 8 ACTIONS. 9 (a) IN GENERAL.—Section 3406(b) of the Internal 10 Revenue Code of 1986 is amended by adding at the end 11 the following new paragraph: 12 ‘‘(8) OTHER REPORTABLE PAYMENTS INCLUDE 13 PAYMENTS IN SETTLEMENT OF THIRD PARTY NET- 14 WORK TRANSACTIONS ONLY WHERE AGGREGATE FOR 15 CALENDAR YEAR IS $5,000 OR MORE.—Any payment 16 in settlement of a third party network transaction 17 required to be shown on a return required under sec- 18 tion 6050W which is made during any calendar year 19 shall be treated as a reportable payment only if— 20 ‘‘(A) the aggregate amount of such pay- 21 ment and all previous such payments made by 22 the third party settlement organization to the 23 participating payee during such calendar year 24 equals or exceeds $5,000, or 25 VerDate Sep 11 2014 23:22 Jun 12, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3530.IH H3530 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 3530 IH ‘‘(B) the third party settlement organiza- 1 tion was required under section 6050W to file 2 a return for the preceding calendar year with 3 respect to payments to the participating 4 payee.’’. 5 (b) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to calendar years beginning after 7 December 31, 2021. 8 (c) TRANSITIONAL RULE FOR 2022.—In the case of 9 payments made during calendar year 2022, section 10 3406(b)(8)(A) of the Internal Revenue Code of 1986 (as 11 added by this section) shall be applied by inserting ‘‘and 12 the aggregate number of third party network transactions 13 settled by the third party settlement organization with re- 14 spect to the participating payee during such calendar year 15 exceeds 200’’ before the comma at the end. 16 Æ VerDate Sep 11 2014 23:22 Jun 12, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H3530.IH H3530 pbinns on DSKJLVW7X2PROD with $$_JOB