PayPal, Venmo and more: tax changes await if you use e-wallets
If you use Venmo, PayPal, or other payment apps, this tax rule change may affect you. CNN.
If you are among the millions of people using payment apps such as PayPal, Venmo, Square, and other third-party e-payment networks, you may be affected by the tax reporting changes that take effect in January.
Payment application providers will have to start reporting a user's business transactions to the IRS if they add up to $ 600 or more per year. A business transaction is defined as payment for a product or service.
Prior to this change, application providers were required to submit Form 1099-K to the IRS only if there were at least 200 business transactions per year in the individual account and if those transactions collectively resulted in gross payments of at least $ 20.
The expansion of the reporting rule resulted from a provision of the American Rescue Plan that was signed into law earlier this year. The ultimate purpose of this provision is to limit unreported taxable income.
What hasn't changed
Keep in mind that the new reporting threshold does not affect your primary tax responsibilities. The income you receive for a product or service, including tips, has always been accountable and, in many cases, taxed.
And you are always required to include this on your tax return, regardless of whether a third party submits this information to the IRS.
The rule change also does not make other transactions suddenly taxable. For example, a friend of yours sending you money on Venmo to refund half of your dinner bill from yesterday will not be taxed.
On the subject: Walmart has been using fully autonomous self-driving trucks for two months: the company shared its experience
The biggest change is the increased visibility of the IRS in commercial income transactions, both those that the recipient of the income has always reported and those that have not been reported.
Why should I be worried?
In theory, the only people who should worry about changing the rules are those who didn't report all of their business income in the first place.
In other words, “tax evaders who violated self-reporting rules and used old thresholds to evade taxes,” said Scott Talbott, a spokesman for the Electronic Transactions Association.
But in reality, according to tax experts, changing the threshold could mean some administrative problems for many tax authorities that use payment applications, whether they are involved in business transactions or not.
“These third-party settlement organizations may not know for sure whether they are dealing with a business or an individual, or whether they are dealing with payment for goods or services or a tax-exempt transaction. It will depend on the taxpayer if they receive a 1099 in any form for a non-taxable event, such as splitting rent between roommates, splitting a lunch bill, or even selling something on eBay for less than what you paid for it. to explain to the IRS that the 1099 was received for a non-taxable transaction,” said Mark Luscombe, principal analyst at tax publisher Wolters Kluwer Tax & Accounting.
Additionally, as Luscombe noted, there's a good chance that your business transactions may be reported in duplicate—for example, if you're a freelancer or independent contractor, you might receive a 1099-K from your payment application provider as well as a 1099. -NEC or 1099-MISC from your customer for the same transaction.
“Again, the taxpayer will have to explain to the IRS that the two 1099s are for the same transaction,” he said.
What should I do now?
Each application provider will need to decide what procedures it will use to adapt to changing rules and will need to alert its customers about what will be required of them to better define the nature of their transactions.
For example, PayPal, which now owns Venmo, recently ran preliminary Q&A for users of both apps. In the coming months, they may ask users for tax information such as an Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), or Social Security Number (SSN) if they have not provided this to us.
You may be interested in: top New York news, stories of our immigrants, and helpful tips about life in the Big Apple - read it all on ForumDaily New York.
Ultimately, new reporting requirements for payment app users may involve some asking customers to pay them in cash—at least for smaller amounts, such as tips.
Or, as Luscombe pointed out, they could choose to use the app for taxable business transactions only and separate their other non-taxable transactions.
Read also on ForumDaily:
Another tragedy struck on the set where Baldwin killed a Ukrainian cameraman
Drinking lots of coffee is good: 3-4 cups a day may even protect against cancer
Subscribe to ForumDaily on Google NewsDo you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.
-
Personal experience: who and why you should not move to the USA5614
-
50 diseases whose presence will increase the cost of health insurance in the USA4329
-
Great opportunities with ChatGPT: 12 easy ways to make money using artificial intelligence1324
-
What should not be on your resume if you want to find a job in the USA763
-
Four unforgivable mistakes immigrants make to the United States552
-
Dependence on cars and one supermarket per city: why ours is unusual in one-story America403
-
Ten secret restaurants in the USA: what is their highlight and how to find them254
-
Personal experience: who and why you should not move to the USA5614
-
Where in the USA to buy the medicines we are used to: a list of pharmacies5330
-
How to hit the jackpot: tips from a man who won the lottery 7 times4898
-
50 diseases whose presence will increase the cost of health insurance in the USA4329
-
Street, avenue, boulevard or drive: how to understand the classification of US streets and roads1461
-
Personal experience: what not to do in America1402
-
Great opportunities with ChatGPT: 12 easy ways to make money using artificial intelligence1324