Tax Reporting Requirements Changed in 2022 Under American Rescue Plan Act
When the American Rescue Plan Act of 2021 was signed March 11, 2021, the law impacted many provisions from previously enacted COVID-19 stimulus legislation. The $1.9 trillion aid package was designed to provide financial aid to some of the hardest-hit industries.
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It impacted tax credits on paid leave and the employee retention tax credit (ERTC), not to mention temporary changes to the premium tax credit. The law also made changes to Paycheck Protection Program (PPP) loans, unemployment benefits, subsidies for employer-sponsored health insurance continuation (COBRA), as well as the establishment of grant programs for restaurants and entertainment venues.
One notable exclusion from the law is the original proposal from the House of Representatives’ bill to increase the federal minimum wage to $15 per hour, amended in the Senate version and then left out in a second vote by the House.
The law also had a provision that changed tax reporting requirements — effective Jan. 1, 2022. The reporting threshold for financial transactions handled through third-party payment services is now $600 annually, a change that would impact small businesses such as freelancers and independent contractors whose customers pay for goods and services through services such as Venmo, PayPal, Zelle and others. These payment services must now notify the IRS when the $600 threshold is met and issue a 1099-K to your business to report the payments as income.
This article was previously updated June 21, 2021.