Congress quietly raises the bar for IRS to track gig-economy income

What it does

This bill raises the threshold for when payment processors (like PayPal, Square, Stripe) must report third-party transactions to the IRS. Instead of reporting all transactions, they only report when a person receives both more than $20,000 AND more than 200 transactions in a year—reverting to pre-2021 rules. It also exempts these transactions from backup withholding unless the threshold is crossed, and grandfathers in anyone who was reported in the prior year.

Why we flagged it

The bill's operative mechanism is a de minimis exception to third-party payment reporting—it does not change tax liability, only IRS visibility. The title frames it as taxpayer relief, but the functional effect is a reporting loophole that reduces tax compliance monitoring for a specific income category.

What the text implies

• The $20,000/$200-transaction threshold creates a 'sweet spot' for tax avoidance: a gig worker earning $19,999 across 199 transactions avoids all IRS reporting, even if they owe taxes. This is not a relief measure for compliant workers—it is a compliance-evasion corridor.
• Payment processors (PayPal, Square, Stripe, etc.) gain reduced compliance burden and liability exposure, as they report fewer transactions and face lower audit risk for their merchant base. This is a private-sector benefit disguised as worker relief.
• The grandfathering provision (exempting anyone reported in the prior year) creates a perverse incentive: once you cross the threshold once, you remain in the reporting system even if you drop below it—but new entrants below the threshold never enter it. This locks in a two-tier system.
• Wage earners and small-business owners who file consistently will bear a larger share of the tax base as gig-economy income becomes harder to track. The bill redistributes compliance burden upward to more visible income sources.
• The IRS loses real-time visibility into cash-flow patterns that signal fraud, money laundering, or structuring. The reporting gap is not merely a compliance issue—it is a financial-crime detection gap.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill reduces IRS visibility into gig-economy and self-employment income, making it easier for high-volume, lower-dollar earners to avoid reporting income and taxes. While framed as relief for gig workers, the $20,000/$200-transaction threshold creates a large reporting gap that primarily benefits those deliberately underreporting or evading taxes, shifting the tax burden to wage earners and compliant self-employed workers.

Who stands to gain

• payment processors and third-party settlement organizations (PayPal, Square, Stripe, etc.)
• gig-economy workers and self-employed individuals earning $20,000–$50,000 annually who wish to under
• insurance and financial-services companies facing reduced regulatory scrutiny on merchant transactio

Named in the bill

Internal Revenue Service (IRS), Section 6050W (third-party network transaction reporting), Section 3406 (backup withholding), American Rescue Plan Act (2021), PayPal, Square, Stripe, and similar payment processors, third-party settlement organizations

Where it stands

31 cosponsors: 31 Republicans.

• Mar 5, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 5, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.