Cash Payment Apps Now Obligated To Report Transactions To IRS
It was good while it lasted, not having to report income from that side hustle through which you got paid via PayPal, Venmo or other cash apps. Cash apps were born right along with the many services that began as side hustles, such as Airbnb, Lyft, and Uber. And in many instances, the side hustles became so lucrative that they turned into full time businesses. The pandemic forced many people into side hustles. And for the longest time, the IRS wasn’t all that interested unless someone had more than 200 commercial transactions and made more than $20,000 over the course of a year.
The IRS has changed its mind, though and just in time for the 2021 tax filing season. “As of Jan. 1, 2022, a provision of the 2021 American Rescue Plan requires earnings over $600 paid through digital apps like PayPal, Cash App or Venmo to be reported to the IRS.” https://www.cnet.com/personal-finance/taxes/making-money-on-paypal-or-cash-app-this-new-irs-reporting-rule-could-impact-millions/
According to the IRS, this is merely a “reporting change” so they can “keep tabs on transactions made through payment apps that often go unreported. So, individual taxpayers don’t have to worry about it for this filing season. However, next year, for the 2022 filing season, you will be receiving a 1099-K tax form if you earn $600 or more through cash apps. You’ll want to start keeping good records because all transactions will show up on the reports to the IRS. That means when your friend repaid you through Venmo for your lunch, that’s going to show up as a taxable transaction. It will be up to every individual taxpayer to keep records of taxable and non-taxable transactions. This new reporting requirement could push many people into IRS trouble.
Remember, the April 18th tax filing deadline is going to be here before you know it. If you haven’t filed in a few years and want to get back on the right side of the IRS, give us a call.