WASHINGTON D.C., DC — With the new year, comes new tax requirements for people conducting business on third-party payment apps like Venmo, PayPal and Cash App.
Under the new tax law that took effect on Jan. 1, 2022, these apps are now required to report transactions for goods and services that exceed $600 during a calendar year to the IRS.
So, if your small business operates on Venmo or if you get paid for babysitting on Cash App, among other things, this change impacts you.
But why now? Because "third-party information reporting has been shown to increase voluntary tax compliance and improve collections and assessments within IRS," the federal agency's website reads.
Those who exceed the $600 threshold will receive a 1099-K form. From there, you'll need to provide information to the IRS on the last day of February. If filing electronically, then you have until the first day of April of the year following the transactions, according to the IRS.
"This new Threshold Change is currently only for payments received for goods and services transactions, so this doesn’t include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips, etc.," PayPal recently informed users in a press release.
The third-party app is also encouraging users to speak with a tax professional when reviewing their 1099-K forms to determine if "specific amounts are classified as taxable income."
You can learn more about reporting requirements here.