Tax code change affects mobile payment app – The Hawk Newspaper
Students who get paid for jobs through Venmo, a popular mobile payment app, may have to pay federal taxes on those earnings starting in 2023.
On January 1, as part of the American Rescue Plan Act 2021, Venmo began reporting business transactions over $600 per year to the Internal Revenue Service (IRS). Commercial transactions are payments for goods or services.
The purpose of each Venmo transaction must be specified in accordance with the company’s user agreement, which reads: “Payments for the sale of goods or services made using the Pay and Ask your Venmo account should either be identified as goods and services or sent to business profiles.
Prior to the tax code change in 2022, Venmo only reported business transactions to the IRS when they exceeded 200 transactions per year and exceeded $20,000, according to the IRS website. This new rule applies to 2022 income, meaning it will affect tax filings in 2023.
Many St. Joe students use Venmo for a variety of transactions, from donating money to fundraising for a campus organization to splitting a bill when they go out to dinner with friends. Students who live off-campus also use Venmo to pay their rent. The new rule, which applies to any mobile payment app, such as CashApp or PayPal, does not affect these non-commercial transactions.
Venmo will report its income and ask people to fill out a 1099-K if someone receives payments for goods and services, said AJ Stagliano, Ph.D., an accounting professor.
A 1099-K is a tax form that flags payments that use a third-party network like Venmo, or involve a credit, debit, or other card transaction.
“It scares people,” Stagliano said. “The 1099-K report is only relevant if someone is selling goods and services, not splitting dinner bills, which is what Venmo was created for.”
Nicolette Senatore ’23 has an off-campus babysitting job for a family in Conshohocken, PA and is paid by Venmo. She hasn’t exceeded the $600 limit and hasn’t yet filed a 1099-K form, but she said she understands why it was necessary for Venmo to start reporting her income.
“I’m a business student,” Senatore said. “Venmo is ultimately a business. I understand that they do, but I think people will start to get frustrated and not use Venmo as much as they used to.
Jenna Troyano ’23 also has an off-campus job, running errands for families in Lower Merion Township, Pennsylvania. She said she hasn’t exceeded the $600 limit and hasn’t had to file a 1099-K form yet, but knows she probably will have to in the future. . Despite this, Troyano thinks the new rule is fair.
“It’s not really bad,” Troyano said. “If someone brings a certain amount of money, it’s not fair to people who bring it in other ways.”
Senatore said she “could see employers and employees get frustrated” if taxation becomes a big issue when using Venmo. Then, employers could stop using mobile payment apps and start writing checks again.
According to the IRS, the American Rescue Plan Act of 2021 only applies to commercial payments for goods and services, not charitable donations. This means that for college clubs and organizations that use Venmo for fundraising, donations will not be taxed.
Troyano, a member of Make a Wish Club and Alpha Phi, said these organizations use Venmo for fundraisers, but weren’t taxed because the system knows the transactions are donations.
“I think that’s just the way they work,” Troyano said. “We weren’t taxed, and personally I wasn’t taxed.”
As long as Venmo knows there is no business income to report and the transaction is labeled as a “charitable donation” in the payment comment, the system will not generate a 1099-K, Stagliano said. .