As of Jan. 1, mobile payment apps like Venmo, PayPal, Zelle and Cash App are required to report commercial transactions totaling more than $600 per year to the Internal Revenue Service.
The change to the tax code was signed into law as part of the American Rescue Plan Act, the Covid-19 response bill passed in March.
Previously, these mobile payment apps only had to tell the tax authorities when a person had over 200 commercial transactions per year that exceeded $20,000 in total value, the IRS said.
Starting Jan. 1, the IRS said, if a person accrues more than $600 annually in commercial payments on an app like Venmo, then Venmo “must file and furnish a Form 1099-K” for them — reporting on all the commercial income they collected through the app.
The tax-reporting change only applies to charges for commercial goods or services, not personal charges to friends and family, like splitting a dinner bill.
In an explanatory document on the new tax changes, the IRS said these changes also apply to people who sell items on internet auction sites like eBay and people who “have a holiday craft business” so long as they accept credit card payments through these apps.
PayPal said both “PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as either personal/friends and family or goods and services by choosing the appropriate category for each transaction.”
“Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service,” PayPal said.
Source: | This article originally belongs to Nbcnews.com
