Sold $600 on Peer-to-Peer apps? Expect a new tax form | Economic news
Which businesses are affected?
This new reporting requirement affects all business transactions – payments for goods and services – on peer-to-peer payment platforms, including PayPal, Venmo and Cash App. The rules apply whether you run a registered small business or a seasonal side business.
“This reporting information will help the IRS enforce compliance,” said Susan Allen, senior tax practice and ethics officer at the American Institute of CPAs, via email. Allen notes that all income from a business or self-employment is “fully taxable and must be reported on the tax return, even if it is less than $600.”
This change affects transactions starting January 1, 2022 and will impact tax returns filed in 2023. Users who meet the income threshold, which was previously a minimum of 200 transactions and $20,000, will receive the 1099-K form of the peer-to-peer platform.
One notable exception: The Zelle money transfer network, used by major banks, does not report transactions to the IRS, including payments for goods and services.
The new law only applies to third-party payment networks that handle the settlement of funds. Zelle, which connects directly to your bank, facilitates messaging between financial institutions but holds no funds.