Is the IRS Really Going to Tax Your Venmo, PayPal and Cash App Transactions?
Media outlets have denied claims of a new tax on transactions with cash apps of $ 600 or more. And while it is true that this is not a “new” tax, as some viral social media posts may claim, the new IRS rules do make it easier for the agency to tax previously undisclosed income paid through apps like Venmo or PayPal. Here’s what you need to know.
How the new cash register rules work
POS applications are currently required to send you 1,099 forms for POS transactions that have a total payment of more than $ 20,000 (or more than 200 transactions) in one calendar year. These forms are used to report the different types of income you received in a particular year, in addition to their regular salary. However, as part of the American Rescue Plan Act last March, this threshold will be lowered to $ 600 in total payments without a minimum number of transactions from January 1, 2022.
Technically, you will not have to pay any additional taxes, as this only applies to income that already needs to be reported to the IRS. But if you weren’t, uh, diligently reporting less than $ 20,000 in income from these apps, you’re going to want to do it now.
It is important to note that this rule does not apply to non-income transactions, such as splitting a rental bill or sending a loan to a friend – just money you make from goods and services in order to make a profit (CNBC gives a good summary of what constitutes income here ). In this case, the IRS is not looking at individual transactions so much as the total cash inflows and outflows going through the account in the cash register application, which will help them better identify the potential income they might want to check.
Otherwise, nothing changes: during taxation, you will still only report your eligible income, including income from cash apps. If the IRS has questions about this, they will ask you. For this reason, however, you will want to keep a good record of every transaction over $ 600.
Maintain a separate account in the cash register application for business transactions
If you still hold all-audit, the last thing you want to deal with – it’s a bunch of personal and business transactions. For this reason, it is best to keep a separate cash register application account for income-related transactions, with good records of what each transaction was intended for. After all, as a taxpayer, you are required to record your income when requested by the IRS, so the better you keep your records, the less you will have to worry about it. For more information on 1099 Forms and Cashier Applications, check out the IRS FAQ .