Do You Make Money via Venmo, PayPal or Cash App? What the IRS 1099-K Delay Means for You
As of 2023, the tax landscape for individuals using payment platforms like Venmo, PayPal, and Cash App has seen significant attention due to the IRS 1099-K form’s reporting requirements. Initially, a new rule was set to drop the reporting threshold for business transactions from $20,000 and 200 transactions to just $600 regardless of transaction count on these apps. This meant that many more users would receive a 1099-K form, potentially requiring them to report additional income on their tax returns.
However, in late 2022, the IRS announced a delay in implementing this new rule. For taxpayers, this means that the previous threshold of $20,000 and 200 transactions will still apply for the 2022 tax year. The delay provides temporary relief for small sellers and those participating in casual economic activities – such as selling used goods or receiving payments for shared expenses – who feared they would need to navigate complex tax reporting because of the lower threshold.
For individuals using Venmo, PayPal, or Cash App to make money through business transactions or side hustles, the essentials remain unchanged: income is taxable and must be reported. However, if you’re under the $20,000 and 200 transaction thresholds for the year, you might not receive a 1099-K form for 2022 earnings. It’s important to note that not receiving a form doesn’t exempt you from reporting your income; it’s still compulsory to report all income when filing your taxes.
What does this mean going forward? Users should prepare for the possibility that these rules may be enforced in future tax years and maintain records of their transactions. The IRS’s delay is an opportunity for individuals to familiarize themselves with their tax obligations related to electronic payments received for goods and services.
Some best practices include:
1. Keeping thorough records of all business transactions conducted via these platforms.
2. Separate personal and business transactions within payment apps.
3. Consult with a tax professional if you approach or exceed the thresholds outlined by the IRS.
As always, staying informed on tax regulations will ensure compliance and may avoid unnecessary stress when managing finances through convenient payment platforms like Venmo, PayPal, and Cash App.
