What you need to know about Venmo and PayPal payments.
According to the IRS, the reporting thresholds for third-party settlement groups that were supposed to be executed for the upcoming tax filing season have been postponed.
As a result of this delay, TPSOs won’t be needed to disclose transactions for the tax year 2022 on Form 1099-K to the IRS or the payee for the lower, $600 threshold amount implemented as part of the American Rescue Plan of 2021. If you didn’t know, Venmo, PayPal, and CashApp are examples of well-known third-party settlement organizations(TPSOs).
This will only mean that the current 1099-K reporting threshold of $20,000 in payments from more than 200 transactions will continue to be intact for the tax year 2022. Payment apps like Venmo, CashApp, and Zelle are the topic of numerous myths and false information, especially about the IRS and what you will need to pay taxes on.
IRS Delayed Form 1099-k, Payment Apps Transactions Myths
According to a published post by Marca, this article aims to clear some misconceptions about how transactions on payment applications are reported to the IRS.
Will it be necessary to pay taxes on the money my buddy sends me via Venmo, CashApp, Zelle, or another payment app?
No, you only need to pay taxes on the money you earned from purchasing products and services. Your income may be taxed if you use the payment app to claim payments for the goods and services you sell.
Do I have to pay taxes if my friend pays me back for dinner using a payment app? What if I get a financial gift?
No, using a payment app to split the meal tab with a friend won’t need you to pay taxes on the money. You won’t need to file a 1099-K if you get money as a gift via a payment app. Via payment apps, my earnings as a sole proprietor will be reported.
If you had 200 transactions and $20,000 in processed payments throughout the year, providers of payment apps will be obliged to report and issue Form 1099-K on payments made for any items or services you have sold.
Am I required to declare income received through a third-party platform if I didn’t get a Form 1099-K?
This isn’t true, you must continue to record your self-employment revenue from your internet-selling business as needed by law. A schedule SE reporting your self-employment taxes must be filed along with your Schedule C and personal taxes if you have a net self-employment income of $400 or more.
Providers of Venmo, CashApp, Zelle, and other payment apps will immediately implement the American Rescue Plan reporting adjustment. The IRS announced on December 23, 2022, that a delay in reporting criteria for third-party settlement firms like Venmo and PayPal will be set to take effect for the following tax filing season. The move under the American Rescue Plan was supposed to commence with the tax year 2022.
Third-party settlement organizations won’t be needed to report the tax year 2022 transactions on Form 1099-K to the IRS or the payee for the lower, $600 threshold amount implemented as part of the American Rescue Plan of 2021 as an effect of this delay.
You shouldn’t receive a Form 1099-k due to the reporting delay announced by the IRS today, but if you sell personal items for a profit, you should reduce the profit from your taxes.