Arroyo warns against new IRS rules: 'This is a honey pot for audits'
Fox News contributor Raymond Arroyo joined "The Faulkner Focus" to discuss the new IRS policies and how they will impact working Americans.
Critics are sounding the alarm on the Internal Revenue Service significantly lowering the threshold for transaction reporting through payment apps, warning the change signals a new level of government overreach that targets small businesses and middle-class Americans.
The IRS issued a reminder last week to taxpayers who utilize third-party payment processors like Venmo and PayPal about changes to reporting income in an updated explainer on their website. These changes created by the American Rescue Act now require the platforms to report any transaction over $600.
"Joe Biden said no one under $400,000 would be targeted by his tax plan. This is going to hit people making nothing to millions, but it's going to hit the middle class," Fox News contributor Raymond Arroyo said on "The Faulkner Focus" Tuesday. "This is wrong."
After the American Rescue Act was passed in March 2021, changes in the U.S. tax code and Internal Revenue Service rules added a new threshold for third-party payment processors. Beginning this tax year, Americans must be prepared to fill out a 1099-K form for any $600 transaction using online platforms.
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The IRS headquarters in Washington (AP Photo/J. David Ake)
The payment apps were previously required to send users a 1099-K form if their gross income exceeded $20,000, or they had 200 separate transactions within a calendar year.
Some have called out Democrats for appearing to defy their original messaging on the American Rescue Act in which leaders said changes would only target wealthy taxpayers.
"We were promised this time that the tax bill was only going to go after the super rich," Americans for Tax Reform's Grover Norquist noted on "Fox & Friends" Tuesday. "$600, they're targeting you and me and anyone who's online."
The new reporting changes are also sparking worries about additional audits on taxpayers.
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"This affects this year's taxes, 2022 taxes," Norquist said. "If these forms are flying around to the IRS, and if you're not ready to defend yourself, if you don't have all the backup proof that you know what you paid and how you did it, you're going to end up paying taxes. You're going to end up being audited because you don't have the paperwork."
"One report by Ticketmaster or Venmo, you get an audit. This is a honeypot for audits," Arroyo said.
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The new rule only applies to payments received for goods and services transactions, not using Venmo or PayPal for personal expenses such as sending gifts, paying rent or reimbursing a friend. In addition, people who sell a personal item at a loss are excluded from this rule.
FOX Business' Megan Henney contributed to this report.
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