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Taxation & Representation: IRS Commissioner to Face Possible Grilling - Pat Soldano

Taxation & Representation: IRS Commissioner to Face Possible Grilling

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Internal Revenue Service (IRS) Commissioner Daniel Werfel will return to Capitol Hill on Thursday to testify before the House Ways and Means Committee. What topics will generate discussion—and criticism?

Below are Brownstein’s top five areas where members are most likely to focus during Thursday’s Ways and Means Committee hearing:

  1. 1099-K reporting guidelines. Commissioner Werfel was initially invited to testify before the committee in December 2023, after all Republicans on the Ways and Means Committee wrote a letter  demanding his testimony on the agency’s apparent unilateral reinterpretation of the lowered 1099-K reporting threshold included in the American Rescue Plan Act (ARPA, Pub. L. 117-2 ). Under the ARPA provision, the reporting threshold for Form 1099-K, covering third-party settlement organization transactions, was reduced from $20,000 (and at least 200 transactions) to $600 (with no minimum number of transactions) beginning in 2022. The reduction was criticized for sowing confusion and potentially creating compliance issues, especially for taxpayers who engaged in only occasional covered transactions. In December 2022, the Internal Revenue Service (IRS) extended the effective date for the lower threshold by one year. Then, in November 2023, weeks before the delayed ARPA provision was set to go into effect, the IRS announced a further delay of the reporting threshold for calendar year 2023. More surprisingly, the agency announced that for 2024 the IRS would implement the ARPA provision at a $5,000 threshold. The delay was intended to “reduce the potential confusion” from the issuance of an estimated 44 million Forms 1099-K, but no explanation was offered for the $5,000 threshold. Ways and Means Committee Republicans responded that the delay was indicative of the agency’s lack of preparedness to implement ARPA requirements and questioned the agency’s authority for the delay as well as the 2024 threshold that is not consistent with the statute.
Stay Informed – 1099-K Reporting Guidelines, IRS Direct File Pilot Program, Employee Retention Tax Credit Administration, Security of Sensitive Taxpayer Information, IRA Funding and Enforcement Initiatives, and More. Click Here!
Tax Package Update: Senators Continue Negotiations: Members of the Senate Finance Committee continue to review and discuss the provisions of the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024 ), including what modifications to make to the bill, if any. As of this writing, the bill continues to await action, with Senate Republicans focused on finding a viable path for the processing of the bill as well as options to address specific concerns. In addition, the Senate has been occupied with the national security supplemental, with a broader funding and border-security package being voted down last week. With the supplemental funding-only measure being passed early Tuesday by a vote of 70-29, the Senate has begun its Presidents’ Day recess, likely pushing further negotiations on the tax package until late February.
Stay Informed – 1099-K Reporting Guidelines, IRS Direct File Pilot Program, Employee Retention Tax Credit Administration, Security of Sensitive Taxpayer Information, IRA Funding and Enforcement Initiatives, and More. Click Here!

Treasury Department Analysis Finds Favorable Return on Investment of IRA Funding: On Feb. 6, the Department of the Treasury and the Internal Revenue Service (IRS) released an analysis  providing an updated evaluation of the revenue estimates and return-on-investment (ROI) of IRS funding allocated by the Inflation Reduction Act (IRA). The analysis found that the IRA’s IRS funding, as enacted, would increase revenue by roughly $561 billion over the next 10 years, and that renewing IRA funding when it runs out would yield estimated revenues of $851 billion. Furthermore, the paper found that a $20 billion rescission of IRA’s IRS enforcement funding, which was first informally agreed to by President Biden and former House Speaker Kevin McCarthy (R-CA) to take place over two years, and then was accelerated to a one-year rescission in a topline spending deal negotiated by current House Speaker Mike Johnson (R-LA), would reduce revenues by over $100 billion. The analysis highlights the Treasury Department’s desire to continue funding the IRS, saying that IRS budget cuts in the 2010s dramatically decreased audit rates on the wealthiest individuals and corporations, and that enforcement funding has enabled the agency to hold wealthy taxpayers accountable.

Stay Informed – 1099-K Reporting Guidelines, IRS Direct File Pilot Program, Employee Retention Tax Credit Administration, Security of Sensitive Taxpayer Information, IRA Funding and Enforcement Initiatives, and More. Click Here!

Gomez to Rejoin House Ways and Means Committee: Rep. Jimmy Gomez (D-CA) rejoined the House Ways and Means Committee on Feb. 2, replacing Rep. Brian Higgins (D-NY) after his retirement. The House Democratic Caucus voted to unanimously approve Gomez rejoining the committee. In a press release , Gomez said that he would especially focus on “issues of affordable child care and housing costs ….” Gomez was previously on the committee during the 117th Congress when Democrats last controlled the House.

Stay Informed – 1099-K Reporting Guidelines, IRS Direct File Pilot Program, Employee Retention Tax Credit Administration, Security of Sensitive Taxpayer Information, IRA Funding and Enforcement Initiatives, and More. Click Here!

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