Venmo, PayPal, and other cash apps required to report payments to the IRS
Starting January 1, 2022, Venmo, PayPal, Zelle, and Cash App are required to report payments for goods and services of more than $600 to the IRS. Prior to 2022, these platforms were required to report on Form 1099-K to the IRS payments for goods or services totaling over $20,000 or for users who had more than 200 in business transactions. Under the American Rescue Plan, passed in March of 2021, the new threshold is $600.
These payments apply to goods and services only. Going forward, on these applications, there will be a way to tag your payment transaction. If the payment relates to a business transaction, the user will be able to identify to the platform what they are paying for. For instance, if you are buying a refurbished dining room table from a local shop and pay with Venmo, you should tag that purchase as a goods or service. The owner of this store will revive a Form 1099-K if their sales are more than $600 for the year.
Keep in mind that payments for splitting dinner with friends or paying a friend back will not be included in reportable IRS transactions. The application user will have to be mindful of transaction tagging when they are sending funds.
In the coming weeks, these cash applications will be requesting tax identification numbers and business codes where applicable. You may not be able to continue to use these apps without providing the required information.
This new requirement will impact your 2022 tax return that will be due in April of 2023. If you receive a Form 1099-K be sure to include that with your 2022 tax package.
Please contact Lance M. Aligo, CPA at KRS CPAs LLC, firstname.lastname@example.org or 201-655-7411 for more information relating to this topic.