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.
The full analysis lists 4 implications of this text.
Who stands to gain
third-party payment processors (PayPal, Square, Stripe, Venmo, etc.); high-volume informal-economy participants (gig workers, casual sellers, small merchants)