For years, the IRS has been known for one thing: when taxpayers fall behind, freeze bank accounts. But times have changed. With the expansion of authority, digital tracking and new reporting laws, the IRS is no longer limited to your checking account. Now it can take advantage of a wider range of financial assets, which many people don’t realize is this far distance.
Understanding this transformation is not about fear, but about preparation. The reality is that the IRS has adapted to the development of money in the modern world. With digital wallets, app-based revenue and side barriers rising, the agency simply closed the gap. But what does this mean for everyday taxpayers?
More than just your bank account
In the past, if someone owed taxes or was investigating, the IRS would focus on traditional bank accounts. Now, the agency has wider access and more tools. This includes the ability to monitor digital payments through platforms such as PayPal, Venmo and Cash applications, especially when these platforms are used for business or self-employed transactions.
Cryptocurrency holding is also on the IRS radar. The agency has added law enforcement and issued subpoenas to crypto exchanges to identify users whose earnings are not reported. Even economic income earned from platforms like Uber, Etsy or Doordash can be tracked more carefully through the new 1099-K reporting requirements.
Third Party Payment App and 1099-K Changes
One of the biggest changes recently is third-party payment processors. Starting from the 2023 tax year, these applications must send Form 1099-K in total transactions over $600, regardless of the amount included. Although this has been postponed, the IRS has made it clear that it is preparing to do this more widely.
This doesn’t mean taxes or personal payments, but it does mean that many casual sellers or associate fraudsters can suddenly find themselves stuck on the agency’s radar, especially when they’ve been relying on informal platforms to keep their income under it.
Seize refunds and offset benefits
If someone owes taxes, the IRS has long been entitled to a salary or a rebate. But now, in some cases, it can also offset certain federal benefits, such as Social Security payments. Despite the safeguards of low-income individuals, those with outstanding debt and untaxed are at greater risk, making these benefits completely lower or intercepted.
This means retirees and fixed income families should be particularly aware of their tax status, even if they have lower annual incomes, because previous debts won’t disappear just because they stop working.
Real estate and property lien
Another tool that the IRS can use involves property lien. If someone owes a large amount of tax deductions, the agency can submit a lien to his home or property. While this does not mean an immediate seizure, it does produce a public record that can affect the ability to credit, refinancing, or even sell or transfer ownership.
This can be an unexpected obstacle to financial planning for those who own a leased property or inherit real estate. Keeping taxes or creating payment plans is crucial to protecting assets from getting entangled in IRS claims.
Why is this transformation important now
Governments are under increasing pressure to close the tax gap – the difference between debts arrears and what they collect. Much of this gap comes from underreported income, especially among self-employed workers, freelancers and small business owners. By expanding its coverage beyond traditional banks, the IRS’ goal is to increase compliance, but it also means that it may be included in audit or enforcement measures without realizing that it is at risk.
Technology makes it easier for the IRS. The algorithm can detect the difference in reporting income and expenditure habits. Data sharing agreements with financial institutions are also being strengthened. As a result, even minor errors or negligence can trigger notifications and fines.
What can taxpayers do?
The best defense is to stay informed and proactive. Keep an accurate record of all revenue, including digital sales, tips, cryptocurrency trading and app-based trading. Even if you can’t pay in full, you can submit your taxes on time, which can also prevent snowballing fines.
For those who owe money, it is usually better to ignore debt than to develop an installment plan with the IRS. And, if confusion arises about the new rules, consulting a tax expert can help avoid expensive mistakes.
As the IRS grows stronger and digital funding becomes the norm, what do you think of the agent’s expanding influence? Protection policies or too much power?
You might like:
Want to minimize taxes? Here is the complete guide
Common tax errors to avoid: Prevent expensive errors and penalties
Riley Jones is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she wrote everything in the sun. When she is not writing, she will spend time outside, reading or embracing two corgis.
