[seattlecyclone typed faster, but I'm going to go ahead and post my answer also. We probably wrote similar stuff.]
First, the Build Back Better Act has only passed the House. It is currently awaiting action in the Senate. It may or may not become law. Personally I think it is reasonable to expect that none of the provisions in the BBB Act will affect people's 2021 taxes.
Regardless of whether or in what form the BBB Act passes, the following is currently true:
You are required to report all taxable income, regardless of how much or how little it happens to be, and regardless of whether or not you have a business structure.
It's unclear the nature of the $3K. You might consider it a gift, if it was unexpected and you and your friend had no formal work arrangement. The other options are hobby income and self-employment income, both of which are taxable ordinary income.
It sounds like Venmo is going to send you a 1099-K, which is a form used to track income payments, usually for people like Uber drivers and the like. If they do, and they probably will if they say they're going to, it'll have your SSN on it and a dollar amount. They will also send a copy of the 1099-K to the IRS, so the IRS will expect to see it included on your tax return.
I don't know what provisions are in the current BBB Act regarding smaller dollar transactions. There was apparently a change in another law, the ARP Act, which lowered the reporting threshold to $600, which sounds like what you're referring to. But that is law that takes effect in 2022, not 2021.
You are correct in that there will be a lot more 1099-K's issued, and a lot of people wondering how to deal with it on their taxes.
You do not need to set up a business structure for this income (although you could if you thought it was a good idea).
There are 9 factors to determine whether it is hobby income or self-employment income. They are listed here:
https://www.irs.gov/newsroom/tips-for-taxpayers-who-make-money-from-a-hobbyIf it's hobby income, you'll report it on Schedule 1 line 8 Other income.
If it's self-employment income, you'll report it on a Schedule C and Schedule SE for the self-employment taxes you'll need to pay on the income. You'll be able to deduct any applicable business expenses from your income on Schedule C and will only pay SE taxes and income taxes on your net profit.
If it's hobby income or self-employment income, it'll just be additional ordinary income which will be in addition to your $60K day job. What you might not understand is that with tax brackets, it's only the amount that is in the higher brackets that is taxed at that rate. It's *
not* as though if your income gets into the 22% bracket that *all* of your income is taxed at 22%. It's just the amount over whatever the bracket threshold is that will get taxed at the 22% bracket; the rest of your income below that level will be taxed at the 0% (standard deduction), 10%, and 12% brackets. This visualizer might help:
https://engaging-data.com/tax-brackets/?fs=0®=63000&cg=0