An earlier version misstated the company's status. "Ĭorrection: The IRS policy on transactions over $600 does not apply to Zelle. "But normal folks using it day to day, I wouldn't worry about it too much. "If we're talking about a significant figure, into the five or six figures, of course you would want documentation," he says. The only time you might really need to worry about being audited, he says, is if you move an "unusual" amount of money on the platform. ![]() If your transaction is flagged by the IRS, Watson says you may receive correspondence from the agency that you can clear up with a receipt, bank statement or explanation. 1, 2022, so filers don't need to worry about it this tax filing season. Small business owners, those with a side hustle and others who receive commercial payments for goods or services through the apps will receive a 1099-K form from the payments apps, which will give the IRS more information about the business transactions being made on the platforms that often go unreported, Watson says. But the agency will receive aggregate transaction amounts from the payments apps about commercial transactions, Watson says, not information on specific payments. That’s the tax form for disclosing transactions with services such as PayPal, Venmo, and Airbnb. Ambiguous headlines could be partly to blame. Small-business owners, prepare yourselves for the era of the 1099-K. For the tax year 2022, the IRS will require reporting of payment transactions for goods and services sold that exceed 20,000 and 200 transactions. That has been miscommunicated to many people, who seem to believe the IRS will be tracking every user's account. What are the new tax laws This requirement only pertains to payments received for sales of goods and services and DOES NOT apply to friends and family payments. Splitting dinner with your friend, sending your roommate money for rent or gifting your cousin a round of birthday drinks? Don't sweat it. "It doesn't change anything about if any transactions are taxed or not." In other words, the IRS is not starting to tax individual transactions between family and friends. "There's been a lot of misunderstanding about the tax reporting changes," says Garrett Watson, senior policy analyst at the Tax Foundation. This also applies to those who run an eBay shop, for example, or any other online store that accepts payment cards, according to the IRS. Previously, it was $20,000 and 200 transactions. Rather, small business owners, independent contractors and those with a side hustle who use third-party payments apps for commercial payments will have their total transaction value over that threshold reported to the agency by the apps. ![]() ![]() The IRS is not requiring individuals to report or pay taxes on individual Venmo, Cash App or PayPal transactions over $600. But users were largely mistaken to believe the change applied to them. Searches on Google and Twitter quickly yielded a flurry of panicked and angry responses to a change in tax law put into effect by the American Rescue Plan last year that lowers the reporting threshold for business transactions on mobile payments apps.
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