WASHINGTON — This yr, Dennis Turbeville, a woodworker in Washington, used the cellular cost service Venmo to promote his wares, acquire funds on a rental property and cut up private bills with household and pals.

He fastidiously tracks earnings for his enterprise, Austen Morris Customized Furnishings, with QuickBooks software program and works with an accountant to ensure the whole lot he owes to the federal authorities is paid accurately.

However Mr. Turbeville is worried {that a} latest tax change meant to crack down on tax evasion by small companies and people working within the “gig” economic system will imply extra paperwork and complications from the Inside Income Service. He’s hopeful that if there are any unintended discrepancies, his enterprise shall be too small to draw an audit.

A tweak to the tax code enacted final yr was meant to make sure that those that use companies comparable to Venmo, CashApp, Etsy, StubHub and Airbnb to gather cash are reporting all their earnings to the I.R.S. The change was a part of the Biden administration’s efforts to slender the $7 trillion “tax hole” between income that’s owed however not collected.

However for tens of millions of Individuals, the brand new requirement means they are going to be confronted with extra tax kinds, probably larger tax payments and quite a lot of confusion. That’s stirring anxiousness amongst a few of the middle-class taxpayers and unbiased enterprise house owners President Biden promised would spared from higher tax scrutiny.

“It is vitally complicated, and I can see how it might be very hectic for somebody who didn’t have an accountant,” Mr. Turbeville stated. “I really feel very a lot at midnight about it.”

The brand new tax coverage was tucked into the stimulus package deal generally known as the American Rescue Plan that Democrats handed in 2021. It has gone largely unnoticed as a result of it applies to earnings earned this yr and impacts taxes that the majority Individuals can pay in 2023. It’s projected to lift about $8 billion in extra tax income over a decade.

However because the affect of the rule and the prospect of shock tax payments turns into clear, it’s drawing pushback from enterprise teams, lawmakers and others, prompting a scramble throughout the Biden administration to provide you with an answer to keep away from one other chaotic tax season subsequent yr.

Senators Joe Manchin III, Democrat of West Virginia, and Invoice Hagerty, Republican of Tennessee, are anticipated to attempt to cut back the tax measure by attaching amendments to the $1.7 trillion spending package deal that Congress is making an attempt to go this week. Enterprise teams have been urging the Treasury Division to behave by itself to delay the brand new necessities to keep away from an administrative disaster on the I.R.S., which has been faulted by an inner watchdog for woeful customer support.

Earlier than the rule change, companies like Venmo provided customers with a snapshot of their earnings known as a 1099-Okay type provided that they acquired greater than $20,000 and had greater than 200 transactions. The kinds had been alleged to be submitted with tax returns to the I.R.S. and had been meant to assist decide how a lot a taxpayer owes.

These thresholds had been lowered to $600 for a single transaction this yr, considerably broadening the quantity of people that obtain such funds and who will doubtless be required to pay extra taxes.

Many taxpayers who run small companies, or sometimes promote items on the aspect, usually combine their enterprise and private transactions. They may face messy fights with the I.R.S. if their tax kinds erroneously present them making extra earnings than they really earned. In some instances, individuals who promote used objects may face excessive tax payments for these gross sales if they can’t find previous receipts that present how the worth of these objects depreciated from the time that they had been bought.

Kidizen, an internet site for getting and reselling kids’s clothes and toys, is seeing a few of its sellers drop off out of concern that they may face inflated — and incorrect — tax payments that they don’t have the means to contest.

“We concern that this burden is inflicting a lot confusion that it’ll deter informal sellers and oldsters from promoting,” stated Mary Fallon, co-founder of Kidizen, explaining that many individuals who promote used items on the web site might want to discover previous receipts to display to the I.R.S. that they didn’t revenue from the gross sales. “They’re promoting children garments that had been bought years in the past, they don’t have these receipts anymore.”

Most policymakers agree that taxpayers ought to pay what they owe based on the regulation. Nevertheless, backlash over the tax adjustments have given Republicans one other avenue to criticize the Biden administration’s plans to empower the I.R.S. by an $80 billion overhaul.

Senator Rick Scott, Republican of Florida, proposed a legislative change final week to dam the I.R.S. growth and reverse the supply that requires broader reporting of monetary transactions on cost apps.

“The Biden administration can also be altering I.R.S. requirements to start monitoring each monetary transaction Individuals make in extra of $600, together with on CashApp, Venmo and PayPal,” Mr. Scott stated. “It’s an outrageous violation of Individuals’ privateness. It’s stuff we see in Communist China.”

Democrats have additionally been on the defensive over the regulation and a few, together with Senator Maggie Hassan of New Hampshire, have known as for amending it. Her laws, the Minimize Pink Tape for On-line Gross sales Act, would change the regulation in order that on-line sellers don’t obtain tax kinds exhibiting their gross sales till these transactions high $5,000. She has warned that “Pointless confusion brought on by pointless tax kinds dangers burdening Granite Staters with undue taxes.”

Lobbyists representing on-line gross sales and funds platforms have engaged in a last-minute strain marketing campaign to steer lawmakers to incorporate such adjustments in a year-end spending package deal that lawmakers count on to go this week. However it’s not clear if there may be adequate political assist to undo the measure.

Arshi Siddiqui, a companion on the regulation agency Akin Gump who’s representing a coalition of companies making an attempt to alter the brand new tax necessities, stated that she anticipated that as many as 50 million taxpayers would get new tax statements for the primary time on account of the measure within the American Rescue Plan.

“If Congress doesn’t act, we’ll see a tsunami of 1099s going out to individuals who shall be confused,” Ms. Siddiqui stated, including that she thinks it’s doable that the Treasury Division may probably change or delay the measure by itself.

Julia Krieger, a Treasury Division spokeswoman, stated that “Treasury and the I.R.S. are laser-focused on rapidly figuring out an answer to deal with any challenges taxpayers might face this submitting season.”

Senator Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, spoke to Treasury Secretary Janet L. Yellen this week and instructed her that the I.R.S. should enhance its communication with taxpayers over the brand new necessities and extra clearly clarify what sorts of transactions shall be taxable.

“There was vital confusion about this provision, and the I.R.S. wants to offer higher readability to taxpayers as quickly as doable,” Mr. Wyden stated in a press release by which he recounted the dialog with Ms. Yellen.

The I.R.S. issued a warning this month to taxpayers who shall be going through the brand new necessities for the primary time. It urged them to guarantee that they’ve all of their monetary paperwork so as earlier than they file their tax returns subsequent yr.

“A little bit additional warning may save folks extra effort and time associated to submitting an amended tax return,” the I.R.S. stated on its web site.

The uncertainty surrounding the tax reporting change may pressure the I.R.S. at a time when it has been working to clear a backlog of tens of millions of previous tax returns and whereas it’s within the midst of a management transition forward of the affirmation of a brand new commissioner.

The dimensions of the change to the principles has additionally supplied recent fodder for critics of the I.R.S. and the Biden administration to argue that Mr. Biden is breaking his pledge to not elevate taxes or improve audit charges on Individuals who earn lower than $400,000 per yr.

“It’s all low-income folks right here,” stated Grover Norquist, the president of Individuals for Tax Reform, stated. “Billionaires don’t have aspect gigs the place they make cash renting their room out.”

Allison Soares, a California tax lawyer, predicted that discrepancies on tax kinds can be widespread due to the brand new coverage and that the burden of proof can be on companies to clear them up.

“I’d anticipate extra audits,” Ms. Soares stated.

Huge companies have additionally been bracing for the worst.

Venmo, which is owned by PayPal, has been making an attempt to arrange its customers for tax adjustments that would have an effect on them. It has been reiterating to prospects that funds not particularly designated as being for items and companies won’t be included on the 1099-Okay that the corporate offers to customers and won’t record particular person transactions.

“Whether or not it’s splitting the invoice for dinner, chipping in for a present, or simply sending cash to a beloved one, PayPal and Venmo funds between two shopper accounts default as a Associates and Household transaction -— making certain they aren’t taxable or reportable to the I.R.S.,” stated Tom Hunter, a PayPal spokesman.

However not all customers are conscious of the variations between Venmo’s enterprise and private accounts. There are considerations that some transactions could possibly be lumped collectively.

Mr. Turbeville, the furnishings maker, switched away from utilizing Venmo’s enterprise service this yr due to the extra charges that the corporate costs, however tracks the enterprise transactions that he makes use of on the “pals” setting manually. He’s additionally anticipating to get an extra tax type from Etsy related together with his gross sales on its web site, which is able to make the tax season even messier for him this yr.

Emily Cochrane contributed reporting.