Washington: A proposal from the Department of the Treasury aimed at decreasing tax avoidance has become the subject of misinformation online.
One Facebook post claimed the “new tax bill” would tax transactions exceeding $600 on smartphone apps like PayPal and Venmo.
“That means if you borrow money using any of those things over $600 that money will be taxed again,” reads the Sept. 20 post, which was shared more than 1,300 times in four days. “You know who deposits $600 or more into their bank account from outside sources to help them survive? The poor and middle class.”
The Treasury proposal would change reporting requirements to account for transactions made on smartphone apps. But the claim that it would levy new taxes is wrong.
“It looks like (the proposal) is just extending to more entities the obligation to report transactions exceeding $600,” Karen Brown, a tax law professor at George Washington University, told USA TODAY. “It places these bank surrogates in the same position as others. It is clearly an anti-tax avoidance measure.”
In May, the Treasury proposed requiring financial institutions to report to the IRS annual inflows and outflows from most bank, loan and investment accounts. The requirement applies to accounts whose inflows and outflows, including paychecks and transactions made via smartphone apps, add up to $600. The details of individual transactions would not be reported.
The proposal is an effort to reduce the country’s annual tax gap – the difference between taxes owed and taxes paid – which the IRS estimates to be roughly $166 billion per year. It does not suggest levying a new tax.
The claim that borrowed money would be taxed is nonsense, too. Personal loans are not considered income and cannot be taxed unless they are forgiven, according to Investopedia.