Between the lackluster initial public offerings and struggles to turn a profit, ride-sharing services such as Uber and Lyft aren’t short of problems. Now, Congress is threatening to make it more difficult for them to retain drivers who are already outraged over low wages. The IRS believes many Uber and Lyft drivers are cheating on their taxes, and Sen. John Thune, R-S.D., is pushing legislation that would dramatically reduce the income threshold above which gig economy companies that rely on contractors must report to the IRS. As a means of cracking down, the legislation would force Uber and Lyft to report to the IRS any amount driver contractors earn over $1,000 in a year, rather than the current $20,000. The $20,000 threshold is likely responsible for “billions of dollars in potential tax discrepancies,” said J. Russell George, the Treasury Department’s inspector general for tax administration, in testimony before the House Ways and Means Committee this month. Underreporting of income skyrockets when no third party is required to report it, the IRS has found. In instances where companies report their contractor payments, only 7 percent of contractors underreported earnings, according to a 2016 report by the agency. But that rose to 63 percent in cases where companies did not report payments. Uber and Lyft drivers make less than $10 an hour after expenses, according to a 2018 Massachusetts Institute of Technology study.


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