With the American Rescue Plan and all its stimulus money came new rules for the IRS and digital cash apps.
These rules are going to impact those who make money through PayPal, Venmo, and other digital payment services.
Third party payment services have always been required to report earnings to the IRS, but the rules are now stricter.
In 2021 anyone with over 200 transactions totaling more than $20,000 had their earnings reported to the IRS.
In 2022 that dollar amount is just $600.
Transaction amounts do not matter.
The only population that should really be impacted by this are those who receive payments for business reasons.
Freelance jobs that will require income to be reported to the IRS
- graphic designers
- baby sitters
- dog walkers
- landlords receiving rent
- similar jobs that earn an income
Reasons you receive digital payment that do not need to be reported to the IRS
- gifts from friends and family
- roommates paying for utilities
- money for food or other expenses
If you have any business transactions exceeding $600 then you will receive a 1099-K form to report to the IRS in 2023.
What to do about your business through PayPal or Venmo and reporting to the IRS
Keep great track of your financial records on the off chance that you have an incorrect tax bill.
If you don’t do this you may end up with a bigger tax bill than you actually owe, and the inability to prove it.
Be sure you’re correctly reporting any and all income to the IRS.
Kari Brummond, a tax preparer at TaxCure, told The Sun that even drug dealers are expected to report their income to the IRS.
She added that the IRS just wants to know your income, not the details that go into how you made it.
This could cause those who choose to do these types of business transactions through a third party app to come under more scrutiny.
Do not intentionally lie about your transactions.
If you’re caught lying, which is not the same as making a mistake, you face charges of fraud.
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