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New IRS Rules Could Affect Venmo, Zelle and CashApp Users (nytimes.com) 183

Users of digital wallets and e-commerce platforms must start reporting small transactions, sowing fears among small-business owners. From a report: A tweak to the tax code enacted last year was intended to ensure that those who use services such as Venmo, CashApp, Etsy, StubHub and Airbnb to collect money are reporting all their income to the I.R.S. The change was part of the Biden administration's efforts to narrow the $7 trillion "tax gap" between revenue that is owed but not collected. But for millions of Americans, the new requirement means they will be faced with additional tax forms, potentially higher tax bills and a lot of confusion. That is stirring anxiety among some of the middle-class taxpayers and independent business owners President Biden promised would spared from greater tax scrutiny.

The new tax policy was tucked into the stimulus package known as the American Rescue Plan that Democrats passed in 2021. It has gone largely unnoticed because it applies to income earned this year and affects taxes that most Americans will pay in 2023. It is projected to raise about $8 billion in additional tax revenue over a decade. But as the impact of the rule and the prospect of surprise tax bills becomes clear, it is drawing pushback from business groups, lawmakers and others, prompting a scramble within the Biden administration to come up with a solution to avoid another chaotic tax season next year.

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New IRS Rules Could Affect Venmo, Zelle and CashApp Users

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  • "Unnoticed" (Score:5, Insightful)

    by grasshoppa ( 657393 ) on Wednesday December 21, 2022 @03:24PM (#63148416) Homepage

    No, it was "unreported" not "unnoticed". You should be asking yourself why the news media of the time didn't think it important enough to make a bigger deal of.

    But sure; they're only going after the "top 1%". I hope at least some of you have learned from this; if the gov feels empowered to go after the private wealth of one person, it'll go after the private wealth of all.

    • But sure; they're only going after the "top 1%".

      Indeed, the reason they need 87,000 new IRS agents is just to go after those 1% even more.... not go after a notion of Venmo users... oh wait!

      • Re: (Score:2, Insightful)

        I thought law enforcement and being tough on crime made conservative peepees hard? The IRS was under staffed and under budget for years and rich people could afford to fight back.

      • 87,000 agents over the next 10 years. Because apparently nobody at the IRS is allowed to retire or quit? Because there isn't increasing complexity to the tax code every single year, making every single review take more time? And there isn't even more tax returns being filed every year as unemployment goes down, and the working population goes up?

        And that doesn't even say anything about the fact that in 2012 they already had that many annualized positions [irs.gov] according to their own data.

        So basically you are w

        • by Ceseuron ( 944486 ) on Wednesday December 21, 2022 @07:07PM (#63149144)

          Because there isn't increasing complexity to the tax code every single year, making every single review take more time?

          I think this statement pretty much highlights the problem we have with our tax system, where you have to justify the hiring of 87,000 agents over the next 10 years just to do their job properly on the basis that tax rules are becoming increasingly complex every year. The solution to this problem isn't to throw more warm bodies at the problem and massively increase the operational costs of the IRS. The solution is to simplify the tax code.

          Imagine if you had a piece of software running on your infrastructure that increases in complexity every year, demanding an ever increasing amount of system resources but not actually providing any added benefits or features. On what plane of existence is it logical to respond to this by simply throwing more servers at it? If the software is too complex, simplify it or throw it out and start over. In my line of work, I'd be fired on the spot for suggesting that the solution to a ponderous, inefficient piece of bloatware that consumes an ever increasing amount of resources is to just add more hardware.

      • by DRJlaw ( 946416 )

        Indeed, the reason they need 87,000 new IRS agents is just to go after those 1% even more.... not go after a notion of Venmo users... oh wait!

        What's your source for the "87,000 new IRS agents" number, precisely?

        Because it's not the IRS. It's the usual RWNJ [nytimes.com] that was amplified by Tucker Carlson and his ilk after assuming that every dollar of increased funding to the IRS was going to go to enforcement agents, rather than improving their ancient computer systems, putting staff on the IRS help lines, and hiring

    • by Nugoo ( 1794744 )

      You should be asking yourself why the news media of the time didn't think it important enough to make a bigger deal of.

      Probably because the people affected already owe the money. This policy change just makes it more difficult for them to avoid declaring some of their income.

      if the gov feels empowered to go after the private wealth of one person, it'll go after the private wealth of all.

      If you're worried about the government going after private wealth, I feel like you should be more upset about civil asset forfeiture than a minor change in income reporting policy. If you're hoping to fight back against the concept of taxation, you're about five thousand years too late.

    • I agree FU NYT/paywall... Thanks for the link!

      • by linuxguy ( 98493 )
        Where does this entitled behavior come from? Why should NYT give you their stuff for free? If you don't want to pay for it, don't. Nobody is forcing you. Why all the grieving?
  • The IRS didn't do this before because it wasn't practical to tax small cash transactions. Now that the vast majority of transactions are electronic, the IRS is happy to tax that old jacket you bought at your neighbor's garage sale, etc. Pretty soon addicts will even be taxed when they buy Chinese fentanyl.
    • Now that the vast majority of transactions are electronic, the IRS is happy to tax that old jacket you bought at your neighbor's garage sale, etc.

      You'd have to have earned a profit selling the old jacket to incur any tax liability. In a garage sale transaction that's not going to not happen.

      But if your roommate is paying you via Zelle and you're writing the check to the landlord, get ready for a whole lot or paperwork and probably an audit.

      • The IRS is going to assume that you made a profit unless you kept that receipt from 20 years ago that can prove otherwise.
        • Suppose I can sell a beanie baby I bought 20 years ago for a profit... so what? The vast majority of the stuff I purchased 20 years ago is worn out, consumed, and in a dumpster. How is it fair to be penalized for the profit if I cannot write off all the other losses?
        • by narcc ( 412956 )

          Complete bullshit.

          Do you have even the tiniest idea of how the reporting works for that? Because it's very obvious to those of us that do that you don't.

          • I do. And you need a cost basis for every item sold. If any sell above this basis, you need to file it as gains.

            The reality is our tax code is too complicated and onerous for even the average citizen to follow. It gets worse with more money and complicated financial instruments.

      • by omnichad ( 1198475 ) on Wednesday December 21, 2022 @04:35PM (#63148650) Homepage

        Technically Zelle has already stated they aren't covered by the rule and won't be issuing 1099-K forms. They facilitate ACH transactions P2P between the sender and receiver's bank and don't hold the funds at any point, so it's technically not a 3rd party transaction in the first place.

        If your roommate is reimbursing you through Venmo and doesn't mark the transaction as "Goods and Services" then it also doesn't trigger the threshold.

    • by fermion ( 181285 )
      There is a reason we only have up $100 bill in the US. It is because currency became electronic so it was less need to higher values. It is even worse when you think that the $100 only buy a bit over $12 worth of stuff compared to 1969 when higher denominations were ended.

      The is the next step in that process. The cashless economy. Which still needs to have tax paid. No one keeps track of cash transactions. It is only when the income does not support the outflows does anyone become suspicious. Like taking

  • by Joe_Dragon ( 2206452 ) on Wednesday December 21, 2022 @03:39PM (#63148462)

    come down on the fake 1099'ser employers not the workers.

  • Why is this needed. You are *already* required to report income. It doesn't matter if it's bank transfer, venmo, cash or carrier pigeon.

    If the government thinks someone is cheating, thaton the government to prove, just like any other crime.

    • By requiring the payment processors to report transactions, it will generate a lot of false positives such as buying a second-hand sofa for fair market value. False positives lead to audits.
      • by narcc ( 412956 )

        This is nonsense fearmongering. If you sell a sofa for "fair market value" then you need to report that income. The IRS is fully aware, even if you're not, of the difference between profits and revenues. If you took a loss on that sofa, that will be reflected in your filing.

        So, are you lying because you're a tax cheat or are you just incompetent?

        • by cayenne8 ( 626475 ) on Wednesday December 21, 2022 @06:00PM (#63148914) Homepage Journal

          This is nonsense fearmongering. If you sell a sofa for "fair market value" then you need to report that income. The IRS is fully aware, even if you're not, of the difference between profits and revenues. If you took a loss on that sofa, that will be reflected in your filing.

          Wait..so you're saying, I'm supposed to keep a receipt/record of every purchase I make...so, that in a few years from now, if I happen to sell it, I can figure if I took a profit or loss on it?

          I have no fucking idea how much I paid for my couch and if I sold it, I'd assume it was less than I paid, but I have earthly idea.

          Piddly shit like this is not something that should be tracked or bothered with...

          • by DRJlaw ( 946416 )

            I have no fucking idea how much I paid for my couch and if I sold it, I'd assume it was less than I paid, but I have earthly idea.

            Piddly shit like this is not something that should be tracked or bothered with...

            Piddly shit like this is not something that will be acted upon, because nobody is buying $1000 "collectable" sofas that have increased in value.

            Your "the IRS is going to assume that I got this for free but sold it for a profit" argument is the most hysterical bullshit ever. And it's trivial to resea

          • by Rhipf ( 525263 )

            It must be nice to be so well off that you have no idea what you paid for your couch. I'll just assume that it cost you $100000 then.
            If you can't remember the exact price that is fine. If you can't remember a rough ballpark figure of what it cost then I guess you are in the wealth bracket where the extra $10 the sale of the couch MAY increase your taxes really isn't that much of a hardship for you.

        • Because creating extra filing requirements for a transaction at a net loss helps the government make even more money! Right?

          Right?

          . . .

      • The IRS is NOT going to audit you because of one sofa sold on Venmo.

        But they would really like to know if you are actually selling 6 sofas a month on Venmo and another 3 on Square.

        • If the IRS sees a 1099 with no corresponding Schedule C... that's like a W-2 with no corresponding 1040. Red flag.
    • This. I'm surprised they went out of their way to bother all the little people rather than auditing some 1%ers, they collectively have nearly as much wealth as everyone else combined in relatively few hands that are easy to target, and they're vastly more likely to be cheating on their taxes with all that money. They do hide their tax-dodging in ways that's harder to untangle (double Irish sandwiches and such), but it still offers a much easier payoff for a given amount of effort from the IRS, and a given a

      • I think it's probably because there are a lot of 1%ers who don't show up that way on paper. Hide enough revenue and you don't have a target on your back in the first place.

    • by narcc ( 412956 )

      It's needed because there are a lot of scumbag "entrepreneurs" who don't think that they need to play by the same rules that everyone else does.

      This change means they can't cheat by failing to report their income.

  • Less than 1% (Score:3, Informative)

    by michaelmalak ( 91262 ) <michael@michaelmalak.com> on Wednesday December 21, 2022 @03:50PM (#63148496) Homepage
    $8 billion/decade comes to $800 million / year, which is less than 1% of the first year's funding of the Ukraine war by the U.S.
  • Can I start writing off expenses like heating the house, depreciation of automobile and consumer products, and raising children? So tired of the government wanting their cake and eating it too.
    • Standard deductions and child tax credits already exist.

      • Good. If they want to lump all my deductions together out of convenience, than I shouldn't have to do a bunch of paperwork to unload some old junk on ebay.
        • You don't. Paypal might file a 1099-K, but you don't have to include it on your 1040 if it's not income.

  • My understanding on this is that the $600 threshold is meant for those using the apps for business payments to avoid skipping out on their taxes.

    I keep seeing Zelle show up in these articles, but according them them, they will not be sending out 1099-k's:

    https://www.zellepay.com/faq/d... [zellepay.com]

    Also, according to Venmo, it appears only if the transaction is tagged "Goods and Services" (which is by default on business profiles) will it be subject to this:

    https://help.venmo.com/hc/en-u... [venmo.com]

    If you're just selling a sofa

    • If you're just selling a sofa (for more than $600 in a single transaction), go ahead and let them tag it as goods and services. You'll get a 1099-K but you still don't have to report it on your 1040, because it's a personal transaction at a loss. If you're running a business, I hope you have a separate Venmo account. And separate bank account.

      • Yay extra paperwork for a transaction that doesn't trigger any tax liability at all. What a wise move on the part of Congress! Your government at work.

        • It's a "paper" trail, nothing more. Technically the 1099-K is transmitted electronically to the federal government and it's likely that the payment processors will send an email link to download rather than mailing it.

          Something that probably won't even get looked at outside of an audit.

  • by bferrell ( 253291 ) on Wednesday December 21, 2022 @04:12PM (#63148556) Homepage Journal

    If it was cash, there just no way to track it so it was glossed over.
    People treated Venmo/Paypal etc as cash for some pretty heavy traffic.

    I know people doing AirBNB rentals via those services exclusively...
    Let's look at that for a moment. $200/night; Let's just say 150 nights a year (It tends to be MUCH higher, but lets just say that)...
    $30,000 a year with no tracking.
    Yes, I read the article, at $20,000 they get paper work anyway before... Unless the payments are spread around to avoid the 20k threshold.

    NO ONE would do THAT, right?
    uh huh.

    I worked 1099 for near to a decade. Got my 1099, filed my taxes, paid what I owed and kept records.

    The small business man in the article has no issue really.
    His quickbooks ARE his records just so quickbooks balances against the 1099K.
    He has another issue if they don't

    This is a FUD article by the 1% who don't wany to pay what they've been avoiding for a VERY long time and trying to rope the rest of us into being cannon fodder for their war against being taxed.

    • Wish I could mod this above 5. This isn’t gonna screw the little guy. This is gonna hit the people who were using venmo to launder cash and dodge paying taxes.

      As much as I dislike taxes, they are literally the only way the government gets funded. Road maintenance, social security, medicaid, the checks that keep your grandma from being homeless, the unemployment insurance you get if you lose your job, every single penny that funds our military, every bridge and dam that needs fixing, the army corp
  • Attempt to close this "tax gap" will never do anything but further punish the lower to middle class population, because a big chunk of it is what was traditionally deemed "impractical to collect". People are used to concepts like being able to sell used goods in garage sales or via classified type ads (or their digital equivalents like Facebook marketplace) without getting taxed on those transactions.

    It's never been legal, since the IRS says you're supposed to voluntarily report income of those types. But

    • Obviously, if the potential income is only $8 billion over the next 10 years, that it isn't a great potential source of revenue for the Feds.

  • > Many taxpayers who run small businesses, or occasionally sell goods on the side, often mix their business and personal transactions

    I hope NYT is being hyperbolic here, but if many are mixing business and personal transactions -- that's all on them for violating one of the basics of business. Don't intermingle funds.

    One of the things they ingrained into us, in Sr High School (in Canada), was "Never mix business and personal".
    If you start a business or side gig -- keep it isolated, and keep track. Open

  • I don't understand opposition to flat tax rates with no loopholes. Billionaires paying 0% will pay more with a 5% flat rate - a lot more!

  • That is stirring anxiety among some of the middle-class taxpayers and independent business owners President Biden promised would spared from greater tax scrutiny.

    he he he ... :'D

    people who actually fell for this didn't realize that in about any country in the world, the total tax income from the middle-class is far, far greater than the total tax income from the rich. this is just basic math, the middle-class is where the real money is and where it makes sense to squeeze the most. this had to be the target all along. oh, and rich people are going to laugh their asses off ...

    • It isn't about revenue. Tens of millions of people could be affected by this rules change, and yet it's not expected to generate more than $8 billion in additional revenue over the next ten years. That is chicken feed.

      What it means is that if you transact with PayPal or Venmo or CashApp etc. then you can be harassed with audits.

  • A Modest Proposal (Score:3, Informative)

    by Waterchicken ( 10263902 ) on Wednesday December 21, 2022 @05:44PM (#63148860)
    Instead of taxing the poor, we could just start using them as a food and fuel resource. This is the only logical way to put the lower class to use, and make them a contributing part of this great society we live in.
  • by DRJlaw ( 946416 ) on Wednesday December 21, 2022 @06:43PM (#63149064)

    It is shocking how the same right-wing crowd that is so concerned about the effect on the poor, the inconvenience of having to fill out forms, and how it's so unreasonable to have to even think about whether a transaction might be for for-profit business rather than unreportable garage sale of junk:

    * demands that all voting require state-issued photo ID
    * demands the end of on demand mail-in voting
    * demands applications for tightly restricted absentee voting
    * frequently demands same-day in person voting

    You can really tell where the values lie when the downtrodden are held up as scarecrows against strong enforcement of tax laws but tossed aside when it comes to restricting participatory democracy.

  • by linuxguy ( 98493 ) on Wednesday December 21, 2022 @10:07PM (#63149428) Homepage
    I am trying to understand why this is a problem? Most of us pay taxes on our income. Why shouldn't those who use Venmo pay taxes on their income? Please help me understand.
    • by kobaz ( 107760 )

      Because it's mostly a tax on the poor and middle class. People are sending each other venmo for stuff on marketplace and craigslist because it's safer than carrying around hundreds or thousands of dollars in cash. Sales tax is regressive as it is.

      It's a lot more cost effective to buy a few hundred dollar couch and not also be stuck with sales tax. It's been like this for hundreds of years actually. Person to person stuff that's private, shouldn't really be the governments concern. Until you become an ac

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