Congress quietly raises IRS reporting threshold, shielding payment processors
S. 1425 — Red Tape Reduction Act of 2025 · Filed by Bill Cassidy (R-LA) · 1 cosponsor · Introduced Apr 10, 2025 · Referred to committee
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What it does
This bill raises the threshold for when payment processors (like PayPal, Square, Venmo) must report transaction data to the IRS. Currently, processors report all transactions over $5,000 or 200+ transactions per year. This bill raises that to $10,000 or 50+ transactions, and exempts smaller transactions from backup withholding rules. The effect: fewer small-business owners, gig workers, and casual sellers will have their payment activity reported to tax authorities.
Why we flagged it
The bill's operative mechanism is a straightforward increase in the dollar and transaction-count thresholds triggering IRS reporting by third-party payment networks. It is not disguised, but the title 'Red Tape Reduction Act' obscures the tax-administration consequence.
What the text implies
- Reduces IRS visibility into informal-economy income (gig work, side hustles, small sales), potentially widening the tax gap and shifting audit burden to higher-income filers.
- Payment processors (PayPal, Square, Stripe, etc.) benefit from reduced compliance costs and customer friction, but the bill does not name them—obscuring the private beneficiary.
- Raises the effective threshold from $5,000 to $10,000, a 100% increase that may exempt millions of small transactions from tax reporting, disproportionately affecting lower-income earners.
- The 'backup withholding' amendment (Section 3) creates a carve-out that exempts transactions from withholding unless BOTH the dollar AND transaction-count thresholds are exceeded in the same year, creating a loophole.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
Ordinary citizens and small-business owners face reduced tax compliance visibility, which shifts enforcement burden to the IRS and may reduce tax collection from lower-income earners who rely on third-party payment networks. The bill benefits payment processors and high-volume informal-economy participants by reducing reporting friction, but at the cost of weaker tax administration and potential revenue loss.
Who stands to gain
- third-party payment processors (PayPal, Square, Stripe, Venmo, etc.)
- high-volume informal-economy participants (gig workers, casual sellers, small merchants)
Named in the bill
Internal Revenue Service (IRS), third-party settlement organizations, third-party network transactions, Section 6050W (Internal Revenue Code), Section 3406 (Internal Revenue Code), American Rescue Plan Act, PayPal, Square, Stripe, Venmo
Where it stands
1 cosponsor: 1 Democrats.
- Apr 10, 2025 — Introduced · Congress.gov: “Introduced in Senate”
- Apr 10, 2025 — Referred to Senate Committee on Finance · Congress.gov: “Read twice and referred to the Committee on Finance”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
Money around this bill
1 lobbying clients named this bill on 2 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $1,680,000 in lobbying spend. A filing names 31 bills on average, so that figure is what each filing reported, not a share belonging to this bill.
More lobbying clients named this bill than 0% of bills with at least one filing.
Bill Cassidy, the sponsor, reported $1,329,254 in PAC receipts in the 2026 cycle.
- American Hotel & Lodging Association — $1,680,000 on 2 filings
Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (2,340 characters) on Aug 17, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,222 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
Money — Senate Lobbying Disclosure Act filings whose specific-issue field names this bill for quarters ending Dec 2025 to Jun 2026. A filing's amount is reported whole beside the median number of bills a filing names; it is never divided across them. PAC receipts are FEC-reported contributions to the sponsor's candidate committee in the 2026 cycle.
As of — lobbying records through Jul 20, 2026 · page rendered 2026-10-20.
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