What Cash App Users Need to Know About the New Tax Form Proposals

The Biden administration announced a revision to the tax proposal, which would raise the tax reporting threshold from $600 to $10,000.

STORY UPDATE: Since the publication of this story, the Biden administration has announced a revision to the tax proposal, which would raise the tax reporting threshold from $600 to $10,000. The US Treasury Department’s fact sheet on the review can be viewed here. This is a proposal and has not been enacted as of November 3.

Some social media users have criticized the Biden administration, the Internal Revenue Service and the US Treasury Department, saying a new tax will be imposed on people who use cash apps to process transactions. Indeed, a Form 1099-K will be sent to app users who receive more than $600 in total transactions, starting in 2022.

This Facebook post, with over 1,200 shares, has been flagged by Facebook as misinformation.


VERIFY viewer Tina asked, “Next year, will I get a 1099 for using money apps like Venmo or Zelle after $600 worth of money 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 law requires everyone to pay taxes on income over $600, regardless of source.

Taxes don’t apply to friends and family transactions, such as rent payments or dinner reimbursements.


The American Rescue Plan Act of 2021 changes the IRS reporting requirement from $20,000 in cumulative payments and 200 transactions to a threshold of $600 in cumulative 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 amendment in March.

These reports using third-party apps, such as CashApp, Venmo, or PayPal, only apply to goods and services, not personal payments, such as if someone reimbursed 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 deductible. It simply aims to obtain more honest reports on income received and deductible expenses incurred.

“If one receives money from a friend or family member as a gift or as a refund, the effect is likely to be the same: no accounting income. If, on the other hand, one uses the cash app to receive proceeds from a business, those business receipts should be reported as such,” Super said.

Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center at the Urban Institute, told VERIFY that Congress has expanded reporting for the gig economy for payments made for services using cash applications. For people using these apps, they would receive an information report and 1099-K to report any earned income.

“Venmo, for example, should give you an information report and tell the IRS, likewise, that you have received a substantial amount of receipts, as well as engage 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,” Rosenthal said.

“It doesn’t mean just because you receive a report of information that you have taxable income, you can’t have gains on, for example, a transaction that was a sale, or maybe just a personal transaction and not in itself a revenue-generating transaction,” he added. “As my wife often gets Venmo payments from some of her girlfriends for groceries, and she makes those payments. And so it wouldn’t result in any income. And even if my wife received such a form, she might ignore it.

He said the IRS controls only a tiny fraction of taxpayers, and that will continue. But if someone is getting a steady stream of money through a cash app, and it appears to be for retail or income, then “it will make that unreported business income more visible to the public.” ‘IRS’.

“The main hope is that companies will voluntarily report their income accurately once their receipts are more openly documented,” he said.

More CHECK: Yes, scammers try to impersonate AT&T and many other companies in text messages

The VERIFY team strives to separate fact from fiction so you can understand what’s right and wrong. Please consider subscribing to our daily newsletter, SMS alerts and our YouTube channel. You can also follow us on Snapchat, Twitter, Instagram, Facebook and TikTok. Learn more “

follow us

Want something VERIFIED?

Text: 202-410-8808

Source link

Comments are closed.