SNOOP Act of 2025
- Bill Number
- S. 1375
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-04-09: Read twice and referred to the Committee on Finance.
- Last Updated
- 2025-12-06T06:37:35Z
AI-Generated Summary
Purpose
This legislation aims to reduce IRS reporting requirements for small online payments processed through third-party networks (like payment apps or platforms). It reinstates a previous exception for "de minimis" payments—meaning very small amounts that do not need to be reported—undoing changes made by the American Rescue Plan Act of 2021, which expanded reporting to include more transactions.
Key Provisions
- Reinstates De Minimis Exception: Amends Section 6050W(e) of the Internal Revenue Code to exempt third-party settlement organizations (e.g., companies like PayPal or Stripe that handle payments) from reporting payments to the IRS unless the total amount for a payee exceeds $20,000 and the number of transactions exceeds 200 in a calendar year.
- Applies Exception to Backup Withholding: Adds a new paragraph to Section 3406(b), treating third-party network payments as "reportable" for backup withholding (a process where payers withhold taxes if the recipient lacks a valid tax ID) only if they meet the same $20,000 and 200-transaction thresholds. An exception applies if similar payments were reportable in the prior year.
- Effective Dates: The de minimis reporting exception takes effect retroactively as if part of the American Rescue Plan Act. The backup withholding changes apply to calendar years starting after December 31, 2024.
Significant Changes to Existing Law
- Reverses the American Rescue Plan Act's elimination of the de minimis exception, which had required reporting for all third-party network transactions over $600 starting in 2022 (though delayed). This restores the pre-2021 thresholds of $20,000 and 200 transactions.
- Extends the de minimis rule to backup withholding rules, which previously did not have such thresholds for these payments, potentially broadening exemptions from automatic tax withholding.
Potential Impacts
- On Government Agencies: The IRS may see reduced paperwork and data volume, easing administrative burdens but possibly limiting visibility into small-scale income for tax enforcement.
- On Citizens: Individuals and small online sellers (e.g., gig workers or hobbyists using platforms like Etsy or Venmo) face less reporting hassle and privacy intrusion for minor transactions, simplifying compliance but potentially delaying detection of unreported income.
- On International Relations: No direct impacts, as the bill focuses on domestic tax reporting for U.S. transactions.
Main Stakeholders Affected
- Third-Party Settlement Organizations: Companies processing online payments benefit from lower reporting obligations, reducing costs and complexity.
- Participating Payees: Small businesses, freelancers, and individuals receiving payments through networks gain from fewer IRS forms (like Form 1099-K), especially those with low-volume activity.
- IRS and Taxpayers Generally: The agency processes less data, while broader taxpayers may experience indirect effects through changed enforcement priorities.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens taxpayer privacy by limiting mandatory disclosures under the Internal Revenue Code, aligning with prior interpretations of reporting thresholds to avoid overburdening low-value transactions.
- Constitutional: No clear challenges; it operates within Congress's taxing and spending powers under Article I, without raising free speech, privacy (Fourth Amendment), or due process issues.
- Political: The bill's title ("SNOOP Act") implies criticism of expanded IRS surveillance on digital payments, reflecting debates over balancing tax collection with individual privacy in the gig economy. It could influence future tax policy on technology-driven income.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (8)
Sen. Hoeven, John [R-ND], Sen. Grassley, Chuck [R-IA], Sen. Tuberville, Tommy [R-AL], Sen. Blackburn, Marsha [R-TN], Sen. Banks, Jim [R-IN], Sen. Ricketts, Pete [R-NE], Sen. Barrasso, John [R-WY], Sen. Hyde-Smith, Cindy [R-MS]
Recent Actions
- 2025-04-09: Read twice and referred to the Committee on Finance.
- 2025-04-09: Introduced in Senate
Bill Versions
- Stop the Nosy Obsession with Online Payments Act of 2025 — issued 2025-04-09 — PDF (4 pages)