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Tax season officially kicks off next week, allowing businesses and gig workers who get paid via peer-to-peer apps to relax a bit.
The IRS planned to require PayPal, Venmo, and other competing apps to submit a 1099 form to all users who made a transaction of $600 or more in 2022. The previous threshold was $20,000.
But just before Christmas, the agency announced it would give these platforms, and the businesses and freelancers who depend on them, another year to duck in line.
Peer-to-peer apps started the pandemic as tools for splitting bills with roommates, but they’ve become the lifeblood of small businesses.
“Babysitting, house cleaning, haircuts and manicures,” said Caroline Bruckner, a tax expert at American University.
Many previously unremarkable cash transactions now have a digital trail, she said. Next year, individuals and business owners will get a snapshot of their taxable income in the form of 1099.
“This change does not change the amount of tax that people actually have to pay,” Bruckner said, adding that time is up for anyone trying to get away with anything.
Rafael Espinal heads the Freelancers Union and encourages members to report all income. Still, “I think sole proprietors were freaking out,” he said.
In some cases, according to Espinal, it was caused by using the same Venmo or Cash App account for personal and business transactions.
“Delays are definitely welcome news,” he said. “This extra time gives them the cushion they need to make sure they follow the rules.”
Claire Van Holland, who owns an accounting firm that specializes in freelancers, said:
About half of her clients rely on peer-to-peer apps. For them, she said now is the time to organize to avoid headaches next year.
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