The Internal Revenue Service (IRS) has established that as of January 2022 applications such as PayPal, Venmo and Cash App must report annual commercial transactions of $600 dollars or more.
This change to the tax code took effect as part of the American Rescue Plan Act, the bill response to Covid-19 that was approved in March.
Previously, mobile payment applications were only required to do so if had more than 200 business transactions in a year totaling at least $20,000 dollars, the IRS explained.
The tax agency has indicated that if a person accumulates more than $600 annually in commercial payments in an application, then it must file and provide a Form 1099-K for them, reporting all business income they collected, through see the application.
The IRS detailed that these changes apply to people who sell items on Internet auction sites such as eBay and to people who “have a Christmas craft business”, provided that accept credit card payments through these applications.
It is important to note that the modification in the tax return applies to charges for commercial goods or services, not to personal charges to friends and relatives, as in the case of dividing the bill for a restaurant consumption.
It also excludes whoever sells a personal item at a loss, such as a used appliance that is less than the price originally paid.
Both PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as personal/friends and relatives or goods and services when choosing the appropriate category for each transaction.
Users must select B Goods and Services whenever they send money to another user to buy an item or to pay for a service.
Form 1099-K for third-party network and payment card transactions is an IRS information return used to report certain payment transactions to improve voluntary tax compliance.
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