New Tax Law: Sell More Than $600 a Year? Venmo, PayPal, Stripe and Square Must Report Your Income to the IRS
New year, new tax rules. For small business owners or independent contractors, this change, introduced via the American Rescue Plan, might make a big difference in your accounting.
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As of Jan. 1, the Internal Revenue Service (IRS) requires reporting of payment transactions via apps such as Venmo, PayPal, Stripe and Square for goods and services sold which meet or exceed $600 in a calendar year — in aggregate.
“If the aggregate amount of payments to a participating payee exceeds $600 for the calendar year, then the third-party settlement organization must file and furnish a Form 1099-K with respect to that participating payee,” according to the IRS.
It’s important to note that this change — which will be applied during 2022’s tax year and moving forward — applies only to payments received for sales of goods and services, and not to friends and family payments.
Tax Law Change Lowers Sale of Goods and Services IRS Reporting Threshold
This change ensures that the reporting threshold is significantly lowered, as the previous requirement placed upon such services was to report payments above $20,000 (and exceeding 200 transactions) within the calendar year, according to the IRS.
Venmo describes a “goods and services” payment as when senders tag a purchase as such, whether it’s for a product you sell or a service you provide.
“This helps create a safer marketplace by making both the buyer and the seller eligible for Purchase Protection if something goes wrong on either side,” according to Venmo.
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TurboTax recommends that if you receive some — or even all — of your business income through a peer-to-peer payment platform, it is best to set up a business account.
“Otherwise, your business and personal transactions will be intermingled, making it tougher to separate business and personal payments,” it says on its website.
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This article originally appeared on GOBankingRates.com: New Tax Law: Sell More Than $600 a Year? Venmo, PayPal, Stripe and Square Must Report Your Income to the IRS
