Is your social media feed full of headlines about a $600 IRS reporting change for Venmo or Paypal transactions? There’s been a lot of confusion and misinformation surrounding this provision, and it’s important to have the facts. The provision is part of the 2021 American Rescue Plan and states that payment apps must report business transactions totaling $600 or more per year to the Internal Revenue Service (IRS).1 Below are some common questions about the change so you can better understand how or if it affects you.
Answering Your FAQs
When did the provision go into effect?
January 1, 2022.
Does it apply to all transactions of $600+?
No, the provision only applies to annual business transactions totaling $600+ made using payment apps like Venmo, Zelle, or Paypal. Individuals using these apps for personal use are not affected.2 A friend sending you $700 for their share of rent or a parent sending their child $50 a month to cover the cost of gas are not transactions that will be reported to the IRS.
Will it affect tax season 2022?
If you use payment apps for business transactions, you won’t need to worry about the $600 IRS provision when filing taxes this year (2021 taxes). It will apply to earnings made in 2022, which you’ll use to file taxes in 2023.
Before tax filing season 2023, a payment app will issue you a Form 1099-K and send a copy to the IRS.3 To properly report your transactions, a payment app may ask you for information including your:
- Employer Identification Number (EIN)
- Individual Tax Identification Number (ITIN)
- Social Security Number (SSN)
Why the change?
Before this provision, third-party platforms had to report earnings and issue 1099-Ks, but until this year, the threshold was much higher ($20,000 and 200 transactions) so it didn’t affect nearly as many people.1 The provision’s goal is to crack down on unreported, taxable income. It is not a new tax; it’s updated tax reporting.
General Electric Credit Union (GECU) is happy to help members with inquiries related to their GECU business accounts. For assistance, call member services at 513.243.4328 or utilize the secure chat feature within Online Banking. For additional questions related to business transactions using payment apps and the $600 IRS provision, please refer to the IRS website.
1Forbes Cash Apps to Report Payments of 600 or More
2CNN If you use Venmo, PayPal or other payment apps this tax rule change may affect you
3Venmo 2022 Tax FAQ