What Cash App Users Need to Know About New Tax Form Proposals
The Biden administration has announced a revision of the tax proposal, which would increase the tax filing threshold from $ 600 to $ 10,000.
STORY UPDATE: Since the publication of this story, the Biden administration has announced a revised tax proposal, which would increase the tax filing threshold from $ 600 to $ 10,000. The US Treasury Department’s fact sheet on the overhaul can be found here. This is a proposal that was not adopted as of November 3.
Some social media users have criticized the Biden administration, the Internal Revenue Service and the US Department of the Treasury, saying a new tax would be imposed on people who use treasury apps to process transactions. In fact, a 1099-K form will be sent to users of the application who will receive more than $ 600 in transactions in total, starting in 2022.
This Facebook post, with over 1,200 shares, was flagged by Facebook as false information.
VERIFY viewer Tina asked, “Next year will I get a 1099 for using money apps like Venmo or Zelle after $ 600 of silver was sent to me?” “
Yes, you will likely receive a Form 1099-K if you receive more than $ 600 on an application. But that doesn’t mean you owe additional taxes. This only applies to income that would normally be reported to the IRS anyway. Current tax laws require anyone to pay taxes on income over $ 600, regardless of where it comes from.
Taxes do not apply to transactions between friends and family, such as rent payments or dinner refunds.
WHAT WE FOUND
The American Rescue Plan Act of 2021 changes the IRS’s reporting requirement from $ 20,000 in total payments and 200 transactions to a threshold of $ 600 in total payments, with no minimum transaction number. The new rule will come into effect on January 1, 2022.
President Joe Biden signed the law with the threshold change in March.
These reports using third-party apps, such as CashApp, Venmo, or PayPal, only apply to goods and services, not personal payments, like someone is reimbursing you for dinner.
David Super, professor of tax law at Georgetown University, told VERIFY in an email: “This proposal does not change what is taxable or what is deductible. It is simply seeking more honest reports on income received and deductible expenses incurred. “
“If someone receives money from a friend or family member as a gift or as a refund, the effect will likely be the same: no accounting income. If, on the other hand, the treasury app is used to receive a business’s proceeds, those business receipts should be reported as such, ”Super said.
Steve Rosenthal, a senior researcher at the Urban-Brookings Tax Policy Center at the Urban Institute, told VERIFY that Congress has extended reporting information on the economics of concerts for payments made for services using payment applications cash. For people using these apps, they would receive an information report and 1099-K to report any earned income.
“Venmo, for example, should provide you with an information report and inform the IRS, in a similar fashion, that you have received a substantial amount of receipts and have engaged in a substantial number of transactions. Next year, Congress lowered the threshold to $ 600. So many more people will receive information reports from Venmo and other cash facilities, ”said Rosenthal.
“It doesn’t mean just because you receive an information report that you have taxable income, you can’t have any gains on, say, a transaction that was a sale, or maybe just a personal transaction and not in itself, an income-generating transaction, “he added.” As my wife often receives Venmo payments from some of her girlfriends for groceries, and she makes those payments. And so it would not result in any income. And even if my wife received such a form, she might ignore it.
He said the IRS only controls a tiny fraction of taxpayers, and it will continue. But if someone is getting a constant stream of money through a payments app and it looks like it’s for retail or revenue, then “that will make that unreported business income more visible to the IRS ”.
“The main hope is that businesses will voluntarily report their income accurately once their receipts are more openly documented,” he said.
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