The watchdog for the Internal Revenue Service blasted the agency for failing to provide timely guidance on state stimulus payments, creating unnecessary complexity for millions of American taxpayers this tax season.
"The IRS has known for months that there is uncertainty about the tax treatment of these special state tax refunds or payments, and it has also known the answers may affect tens of millions of taxpayers,” Collins wrote. “Yet to date, it has issued no specific guidance whatsoever."This is the second instance recently that the IRS has made an untimely decision.
The new 1099-K reporting rule required third-party transaction networks such as Venmo, Paypal, eBay, and Etsy to issue a 1099-K for users with more than $600 in payment transactions during the year. This new rule would have impacted millions of taxpayers, given how many Americans use these platforms, but the amounts listed on the 1099-K forms may not have been taxable, depending on the circumstances.
"The IRS must issue guidance and provide education in a proactive and timely manner,” Collins wrote. “Timely guidance is vital to taxpayers, tax professionals, and the industry, and it is just good tax administration.”
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