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Businesses United States

Venmo, PayPal and Cash App To Report Payments of $600 or More To IRS This Year (foxbusiness.com) 264

schwit1 writes: Millions of small business owners who rely on payment apps like Venmo, PayPal and Cash App could be subject to a new tax law that just took effect in January. Beginning this year, third-party payment processors will be required to report a user's business transactions to the IRS if they exceed $600 for the year. The payment apps were previously required to send users Form 1099-K if their gross income exceeded $20,000 or they had 200 separate transactions within a calendar year. Democrats made the change in March 2021, when they passed the American Rescue Plan without any Republican votes. The new rule only applies to payments received for goods and services transactions, meaning that using Venmo or PayPal to send a loved one a gift, pay your roommate rent, or reimburse a friend for dinner will be excluded. Also excluded is anyone who receives money from selling a personal item at a loss; for example, if you purchased a couch for $300 and sold it for $250, the amount is not taxable.
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Venmo, PayPal and Cash App To Report Payments of $600 or More To IRS This Year

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  • by Applehu Akbar ( 2968043 ) on Wednesday January 05, 2022 @03:13PM (#62146123)

    Democrats made the change in March 2021, when they passed the American Rescue Plan without any Republican votes...

    After plebeians have filed their taxes this year and had to undergo explaining every set of rent payments made through a cash app, we're going to enjoy a midterm election without any Democrat votes.

    • by quonset ( 4839537 ) on Wednesday January 05, 2022 @03:18PM (#62146141)

      Democrats made the change in March 2021, when they passed the American Rescue Plan without any Republican votes...

      After plebeians have filed their taxes this year and had to undergo explaining every set of rent payments made through a cash app, we're going to enjoy a midterm election without any Democrat votes.

      Huh? Why would the renter have to explain anything? It's quite obvious this is a recurring monthly payment to a business. It's the business who has to report the income from these payments.

      You don't think people have to explain getting two large deposits into their back accounts every month from their employer, do you?

      • Actually it is paypal/venmo who have to report and you who have to explain come tax time.
      • Re: (Score:2, Interesting)

        by omnichad ( 1198475 )

        3 roommates share the cost of rent, but landlord only wants 1 check. So one person writes the check and the other two Venmo the payer. Now at the end of the year, the person writing checks to the landlord has to claim all of the reimbursements as "income" and then deduct the cost of rent as a "business expense."

        It's going to be utterly ridiculous.

        • by denzacar ( 181829 ) on Wednesday January 05, 2022 @04:17PM (#62146429) Journal

          From: Technical Explanation of Section 9674 of H.R. 1319, the âoeAmerican Rescue Plan Act of 2021.â (March 01, 2021).
          https://www.jct.gov/publicatio... [jct.gov]

          Explanation of Provision This provision lowers and modifies the threshold below which a third party settlement organization is not required to report payments to participants in its network. Under the provision, for any calendar year, a third party settlement organization is required to report third party network transactions with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions.

          Third party network transactions include any commercial transactions settled through a third party payment network. The provision also clarifies that third party network transactions only include transactions for the provision of goods or services (e.g., personal gifts, charitable contributions, and reimbursements are not included).

          For example, an individual who has registered for a mobile payment service and uses such a service to reimburse friends or relatives for expenses, or on occasion sells a used item to another person, would not be engaging in transactions that are subject to reporting requirements.13 However, if that individual were to register with such mobile payment service for the purposes of engaging in commercial transactions, such as regularly carrying on a trade or business through use of that service, the mobile payment service would be required to report under the provision.

          This only affects businesses, not people paying rents. You have to be registered as a business for it to affect you in any way.

          Hell, even Fox News can't but explain that it doesn't affect individuals and that it only makes Venmo and PayPal report something that businesses should already be reporting.

          The new rule only applies to payments received for goods and services transactions, meaning that using Venmo or PayPal to send a loved one a gift, pay your roommate rent, or reimburse a friend for dinner will be excluded.
          Also excluded is anyone who receives money from selling a personal item at a loss; for example, if you purchased a couch for $300 and sold it for $250, the amount is not taxable.

          To be clear, business owners are already required to report these incomes to the IRS.
          The new rule simply means that the IRS will figure out what business owners earned on the cash apps regardless of what that individual actually reports on their 1099-K because it broadens the scope of the threshold.
          (This rule is separate from another Democratic proposal that would require banks and other financial institutions to disclose accounts with $10,000 of annual deposits or outflows to the IRS).

    • Clearly you didn't bother to read the summary, as it clearly says it's the payment processor that has to file with the IRS, and also clearly states that rent payments would not be included.
      • Clearly you didn't bother to read the summary, as it clearly says it's the payment processor that has to file with the IRS, and also clearly states that rent payments would not be included.

        And exactly how will the company or IRS know what payments are for what?

        I dunno about Venmo, but I've never seen on PayPal where you check a box saying what type money transaction is happening.

        Unless there's something that happened in past couple days, I've never seen a check box for "rent" before.

        • by bws111 ( 1216812 )

          They don't have to know what the payments are for, they just have to know who is being paid. If it is a business being paid, they report it. If it is a person being paid, they don't. The 'rent' thing was an example. If Jim and Joe are roommates and Joe pays Jim $750 for the rent, it doesn't get reported (Jim is not a business). When Jim pays the landlord $1500, it is reported (the landlord is a business).

          • by e3m4n ( 947977 )
            no, you get the 1099-K when you RECEIVE $600/yr, not who you pay. The whole point of the democrats law is to catch tax cheats. They have no way of knowing if you're making $600/yr selling weed, collecting rent from your roommates, selling some old couch, or doing car repairs in your back yard. If you receive $600/yr or more, youre going to get a 1099-K "just to be on the safe side". Tax cheats are not registering as a legitimate business in these apps. When you fail to report it as income on your 1040, the
        • I've never seen a check box for "rent" before.

          It's not gonna be a box but a form. [theguardian.com]

          This means that whether you're selling products or services on Amazon, Etsy, eBay or at craft shows or just face-to-face, you can now expect to receive a 1099-K form - after 31 January 2023 - from the payment services that you're using of the revenue they reported on your behalf to the IRS for the purchases of goods and services made in 2022.
          How do these services know that the purchases were made for goods and services and not just a payment from a friend or family member? Most of them are adding an extra form during the payment process for the payer to identify the nature of the payment.

          You can also expect more questions this year from your payment service provider.
          "You may notice that in the coming months we will ask you for your tax information, like a social security number or tax ID, if you haven't provided it to us already, in order to continue using your account to accept payments for the sale of goods and services transactions and to ensure there aren't any issues when these changes take effect in 2022," PayPal warns in a blogpost.

      • No it is cumulative over the course of a year and after you've had an aggregate of $600 over the course of the year they have to disclose ALL of your financial transactions.

        This was the brilliant plan to make everything they were putting in (a whole lot of nothing that somehow cost trillions) free by increasing tax collections. They told you they were going after billionaires to pay their share but what they really meant is they are going after everyone to make sure every single penny of day-to-day transact
        • They told you they were going after billionaires to pay their share but what they really meant is they are going after landlords too

          I have so much outrage for these, in my American home on my Apple electronic devices, I can contain it. I will go to next MAGA really! And change my vote to the Republican! Lock her up lock her up, da!

          • I didn't say anything about landlords... except in that they are included in 'everyone.' I do mean everyone your personal bank is also a payment processor and if you have more than $600 worth of transactions a year this is total disclosure of YOUR financial records. This applies to virtually every renter not just landlords.
      • clearly states that rent payments would not be included.

        What it clearly states is that it would not be taxable. That's not the same as not being included on the 1099-K. It's up to you when filing to declare which things are taxable and if there's a big disparity you'll be more likely to get flagged for an audit.

    • After plebeians have filed their taxes this year and had to undergo explaining every set of rent payments made through a cash app, we're going to enjoy a midterm election without any Democrat votes.

      This affects the receiving end. So the plebs according to you think it's a great idea to let rent seekers hide income, REALLY?

      Oh, oh, I get it, hey I'm a pleb too, friend!!
      Let's uh, rally around getting 1099-B cancelled too, because uh.. that totally hurts the poors, I mean plebs, so they should hate it that I, I mean we, poors.. plebs! have to report stock trades, let the stock trickle down I always say, I make more money on the stock market, and then, well you, poors, I mean us, we can, you know, make m

  • This is why ... (Score:2, Informative)

    by b0s0z0ku ( 752509 )

    I've never used those apps. Want to split a bill? I'm giving you cash. Don't accept cash? Consider yourself stiffed. I'm "that guy" who goes to the ATM twice a week and takes out $500, keeps it it at home, and tops up the wallet to $100 or $200 when it runs low.

    Credit card points? What are those? Don't care - won't use a card unless it's for online purchases.

    • All payment processors will have to play along. That means BTC exchanges (for government issued currency) as well...

      • What BTC? I'm using the paper kind of cash. (Which isn't going away any time soon since a lot of cities have actually mandated that stores accept it).
    • Countries like the Netherlands are trying their hardest to make cash impossible to use.
      Understand that cash is a government's nightmare, and electronic, perfectly traceable payments are a government's wet dream.

      • Fortunately, it's not currently impossible to use where I live. In fact, it would be hard to make many purchases WITHOUT cash. This being said, some part of me hopes that the world sees a massive geomagnetic storm that kicks tech back 75 years in our lifetimes. Carrington Event II.
        • by e3m4n ( 947977 )
          glad Im not the only one who wonders if the entire internet took a shit, if life would improve. A Carrington Event would put us back to horse and buggy I think. Globalization has done some really shitty things to small town communities. We dont talk to or even know most of our neighbors. We rarely shop at local stores if any even exist. Its mostly Walmart, Lowes, Home Depot type shit with global supply chains.
    • The summary clearly states that payments to a friend splitting a bill are exempt. Great that carrying cash works for you. Many of us are smarter with our money and go the credit card route for the protections it offers, in addition to getting more for our money.
      • I get a lot for my money paying cash ... many small businesses charge slightly less. And yes, I know that that likely means and DGAF. If Apple and Google can get away with murder tax-wise, can't say I care about small businesses doing the same.
      • by e3m4n ( 947977 )
        if you are that fucking stupid good luck when you get your 1099K. They are not going to know if that $500 was, your friends share of rent, an old couch you paid $900 for, or your side weed business from your attic grow operation. When you receive $600/yr, you are going to get a 1099K "just to be safe". If you load a payment onto a prepaid visa or paypal for the very protections you speak of (i do this for vacations to protect my primary account) you are going to get a 1099K. These accounts used to be set t
    • Re: This is why ... (Score:4, Interesting)

      by registrations_suck ( 1075251 ) on Wednesday January 05, 2022 @03:46PM (#62146323)

      So you're a Luddite. Nobody cares man.

      Press on.

      In the meantime, I will enjoy the $1500 cash back I got for 2021.

      • That's chump change for selling your privacy and personal autonomy to a bunch of bankster pieces of shit. But do carry on.
    • by e3m4n ( 947977 )
      while I applaud your use of cash, this is part of the master plan to eliminate cash and make traceable transactions required for everything. They wont go down without a fight. Ironic that most of the tax cheats and theives are actually working in DC.
      • Agreed ... and bankster filth have also been using COVID as an excuse to slander cash as being dirty, unsafe, etc. This being said, cash is an option for now. I want to do my (small) part to keep cash payments flowing and keep cash normalized. I don't have to pay cash, but I choose to to keep the cash economy humming for those who need it.
  • Not new? (Score:5, Informative)

    by RegistrationIsDumb83 ( 6517138 ) on Wednesday January 05, 2022 @03:33PM (#62146233)
    The article gets it half right, you do have to manually file a 1099 report with the IRS if you pay a contractor more than $600 in a year, regardless of payment method. The part it gets wrong is that at least on PayPal, they've been reporting these automatically for years. It's actually kinda a benefit since it saves you the trouble of doing a 1099 yourself (which is a hassle since it MUST be done on either original irs paper or via a paid third party service)
  • by ugen ( 93902 ) on Wednesday January 05, 2022 @03:35PM (#62146243)

    IRS can barely process the amount of information they currently have.

    Personal anecdote:

    I submitted a tax return earlier in the year with a lower refund (applied to the next year return). Then recalculated and submitted an amended return with a higher refund (still applied to the next year return) - this was in April.

    In August, IRS finally processed the first return and "proactively" figured I overpaid and sent me a check for the difference (which matched the increase in the refund I asked for in the amended return).

    I immediately returned the check and requested that it still be applied to the next year refund (because eventually they will get to my amended return, and then they will say I am asking for too much as they already sent the check to me :) ). They received the check and notified me that they began processing this request in August.

    Then in December sent me a letter saying they are still "working on it" and it will take 6 more weeks. Not holding my breath (but I did my part).

    Given the state of IRS systems and information processing, swamping them with millions more of transaction reports is as likely to overload their capabilities even more. May be that will help real tax evaders "fly under the radar".

  • There I said it (Score:4, Insightful)

    by stikves ( 127823 ) on Wednesday January 05, 2022 @03:37PM (#62146271) Homepage

    They are scraping the bottom of the barrel.

    Now it is onto garage sales, one off jobs, and unreported tips. Okay, unreported tips need to be reported, but the paperwork overhead will be enormous burden for the little guy.

    So, you helped fix the neighbor's fence, and they paid back the Home Depot cost, plus a bit extra. It was not work "per se" before, now you need to go though receipts, calculate gas mileage, and add deprecation for your portable saw, like a small business would.

    When I heard "87,000 new IRS agents", I was pretty sure it was not for the rich. (hint: the rich is already audited, some are assigned full time IRS agents).

    • That's where you give a dollar's tip on a credit card for recording purposes and give the rest of the tip in old-fash cash that gets pocketed by the server.
  • But how are the payment services going to know that the $650 that was transferred was for selling something at a loss, vs. a profit? They don't, so they must report it, and then both parties to the transaction get to prove it wasn't taxable.

    But these rules have been in effect for years. The government is just changing thresholds and expanding who has to report.

  • I use cards like Paypal and MyVanilla to preload cash that I take out of my bank account when I vacation. That way in the event my card gets compromised its not my main bank account nor will it leave me stranded on vacation. Now these fucktards want me to pay tax TWICE on the same money. fucking duchebags! Meanwhile Pelosi and others make millions in stock trades based on policies they make as lawmakers. $600 ! For fucks sake, make a law banning ALL congress officials and employees from owning anything or
    • Try reading again. Unless you're receiving credit card payments in excess of $600 this does not affect you. As in - people are paying you using their own credit card.

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