Payment platforms like Venmo and CashApp have become some of the easiest ways to send someone money over the past few years. However, if you get paid for your work through these apps, there are some important tax changes you need to be aware of.
in Recent Press ReleasesThe IRS has confirmed that third-party payment platforms (PayPal, CashApp, Venmo, Zelle, etc.) will soon report transactions above a certain amount to the government. For 2024 or 2025, the limit is $5,000. After 2026, the limit will be lowered to $600.
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This rule was passed several years ago, but the IRS delayed it out of concern for taxpayer confusion.
So what does this mean to you?
Technically, you should have continued to report this income regardless of how much you actually received. But now the IRS is forcing you to pay taxes on that income by requiring payment platforms to report it.
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The good news is that personal payments, regardless of the amount you receive, are not subject to this law.
How does the government know the difference between personal and business payments?
First, when sending money, these platforms give you the option to mark the transaction as a private transaction or a transaction for goods and services (which usually charges a fee to the recipient). Payments received based on the latter designation will automatically appear on your Form 1099-K.
If you think you can tell a customer to mark a payment as a private payment, that’s illegal. Additionally, if you receive money from multiple accounts, payment platforms will usually ask you if you are a business. If you refuse and the activity continues, the Company will conduct an investigation. Considering that payment platforms want to maintain tax compliance, there are many reasons to make sure everything is equal.
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The IRS requires businesses to send you Form 1099-K by January 31 of the following year if you meet the requirements.
