Cut Red Tape for Online Sales Act
Bill: S.3840 | Sponsor: Sen. Hassan, Margaret Wood (D-NH)
Policy area: Taxation

Summary:
Cut Red Tape For Online Sales Act
This bill modifies requirements for third party settlement organizations to eliminate their reporting requirement with respect to the transactions of their participating payees unless they have earned $5,000 or more. A third party settlement organization is the central organization that has the contractual obligation to make payments to participating payees (generally, a merchant or business) in a third party payment network.
The bill also requires entities that report income to to issue a plain-language description of the taxability of income reported on Form 1099-K.

To amend the Internal Revenue Code of 1986 to increase the threshold 
 for the de minimis exception for information reporting by third party 
                       settlement organizations.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Cut Red Tape for Online Sales Act''.

SEC. 2. MODIFICATION OF DE MINIMIS THRESHOLD FOR INFORMATION REPORTING 
              BY THIRD PARTY SETTLEMENT ORGANIZATIONS.

    (a) In General.--Section 6050W(e) of the Internal Revenue Code of 
1986 is amended by striking ``exceed $600'' and inserting ``equal or 
exceed $5,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns for calendar years beginning after December 31, 2021.

SEC. 3. APPLICATION OF BACKUP WITHHOLDING WITH RESPECT TO THIRD PARTY 
              NETWORK TRANSACTIONS.

    (a) 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.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2021.
    (c) 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.

SEC. 4. PLAIN LANGUAGE NOTICE TO PAYEES REGARDING FORM 1099-K.

    (a) 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 using a Form 
or notice issued by the Internal Revenue Service.''.
    (b) 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.
    (c) Establishment of Notice to Taxpayers With Respect to Form 1099-
K.--
            (1) 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.
            (2) 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.
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