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Birmingham, Alabama (WBRC) – The IRS is changing course on plans to tax business transactions on third-party money-sharing apps such as Venmo and PayPal.
That change was due to start this month, but the agency has postponed it until next year.
Many users of services like Venmo, PayPal, Zelle, and Cash App only recently received IRS tax returns related to their transactions.
The IRS is trying to allay fears of a sudden tax bill, choosing to delay a rule requiring payment platforms to issue 1099-Ks to both the IRS and individual app users who report payments.
Currently, this form is issued only if you make more than 200 transactions totaling more than $20,000 in a year, but that will change next year.
“They lowered that threshold to a total of $600 with no transaction limits. You can imagine giving,” said Jay McGowan, Senior Advisor at Welch Group.
The 1099-K form is a snapshot of all online payment transactions.
This form is used to report these transactions in order to improve our voluntary tax compliance.
“So whenever you do any other type of work that isn’t tied to the traditional 9-to-5 hours, like a W-2 employee, you’ll get a 1099 form. Things like Lyft, Amazon’s gig workers, small businesses, if you contract with a Fortune 500 company, you could be issued a 1099.
Tax experts say it’s important to note that any income earned as a transaction or business for goods or services provided must be reported to the IRS, but the IRS said the new law does not apply to personal income. We emphasize that it is not intended to track transactions.
“The biggest thing is that they do it with business accounts. So you usually have to put in the effort to create a business account. It’s about doing business only with accounts, but people raise money.For example, sometimes companies use that Cash App, but now they really need to separate the two,” said Taxx Wiz’s highest Managing Director Tevin Harrell said.
Personal transactions such as birthday and holiday gifts, sharing car and meal costs, and sending money to family members are not taxed.
This change is expected to generate approximately $8 billion in additional tax revenue over 10 years.
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