The deadline for which the Internal Revenue Service will require taxpayers to report every transaction of at least $600 that are received by Venmo, PayPal, Zelle, Cash App and Credit/Debit cards will soon be upon us as the tax year is ending in just a couple of weeks.
Regarding the collection of more personal financial information about taxpayers’ bank accounts, Treasury Secretary Janet Yellen said, “It’s just a few pieces of information about individual bank accounts,” and confirmed that the IRS has the capacity for such scrutiny.
In other words, the IRS will now produce a 1099k tax form for these transactions, going back to tax year 2021. If you receive these payments, expect to receive what could be a deluge of new forms to file and the taxes that are due.
Although she added that the extra information will help the IRS target and do audits on “high-income and wealthy individuals that may be concealing their transactions and income.”
The change will adversely affect small businesses, part-time employment and side gigs. Critics have termed this government overreach as the agency seeks to obtain data from smaller entities who are more likely to receive smaller payments.
The recent from $20,000 transactions, to $600 for a single transaction, was part of the bill, and it is expected to identify Americans who are not reporting the full extent of their gross income to the government.
Critics have called the bill out as part of government overreach into the personal finances of Americans, and have noted that such extreme tax measures will harm small business owners and average citizens trying to make ends meet. This contradicts the president’s statement that greater tax enforcement wouldn’t affect lower- and middle-income Americans.
A survey conducted by the Coalition for 1099-K Fairness—founded by online outlets eBay, Etsy, Mercari, OfferUp, Poshmark, Reverb, and Tradesy—found that 86 percent of casual sellers made less than $5,000 in gross revenue from items sold in 2021.
Nearly half (47%) of respondents said they were unaware of the new IRS reporting requirements.
The group said the guidelines will cause unnecessary confusion amid conflicting information with many forced to consult with costly tax consultants. Even those who do not owe any taxes will be forced to report their income while online marketplaces will be required to collect full social security numbers from small-time sellers.
Out of the 40 percent who said that the new mandates create economic hardship, 74 percent said they sell online to meet necessary personal expenses.
Sixty-nine percent of respondents said they would consider stopping to sell online due to new measures.
The requirement is retroactive according to an “explainer“ recently posted online, the IRS said that according to the controversial American Rescue Plan Act of 2021. Any payment made after March 11, 2021, that exceeds $600 must be reported. The real target of the new reporting rule is small business owners, and people working side hustles or part-time gigs for extra income. Earlier the reporting threshold was $20,000 and more than 200 transactions within a calendar year. But the amended rule applies to any single transaction.
“You should begin to, or receive more Form 1099-Ks by January 31 if, in the prior calendar year, you received payments from all payment card transactions (e.g., debit, credit, or stored-value cards), and in settlement of third-party payment network transactions above the minimum reporting thresholds,” said the agency.
The new Form 1099-K will be sent by the payment platforms through which the transaction was done.
Failure to report transactions on Form 1099-K could trigger an audit by the IRS since the agency receives a copy of the form the same as they receive W-9 forms from employers.
Note: this only for business accounts.
People are panicking because of articles like this.
“Americans” Don’t have to report every 600 dollars.
Business do. They always had to.
The question is what’s considered a business?
Many people sell things online or offer on the side services that dont Fall under an actual business don’t operate as a business etc but rather as a side hustle to help cover the bills
And if IRS starts to audit these transactions and start deciding what or what isn’t considered a business it will create a ton of confusion and give the IRS the authority to target whomever they wish or are told to audit under the guise of doing a “business audit”
Fact, Side hustles to cover bills is absolutely taxable.
People need to learn to read for comprehension. Much ado.
“New Taxes”…? Lol. Translation: less tax evasion.
In any case, Zelle is refusing to produce the 1099-Ks.
Yes, I read the IRS explanation. Casual sellers, self-employed, free-lancers not previously required and yes, businesses that used to only report $20,000 have to report $600. Going back to March 2021. I occasionally get appliances and refurbished computers from closeouts and sell them on Ebay and Amazon, generally for over $600 each. I already got close to a hundred 1099-Ks combined from both PayPal and Amazon Pay going back to 2021. They add up to over $10,000 so far. I now have to report them even though I am not a business seller.
Gosh, it’s not a new tax!
Individuals always had to report money earned. It’s tax evasion otherwise.
This bill is making it harder to commit fraud, as the irs will know of any transaction above $600.
ITS NOT A NEW TAX.
I was buying and selling high end cameras. I got fined for intentionally under-reporting my income. Because of my Schedule C I got audited.
They came my house. They wanted mucho daneiro. After 6 hours of producing what they wanted, they tell me let’s call this a hobby. He explained: We’ll simply say that you do this as a hobby. Whoa! But this is the IRS crocodile saying this and puting it in his incident report.
The end of this true story is the $25K fine for fraud was knocked out and I even got a refund. B’Chasdei HaShem.
Well, those days are over.
Not sure what your IRS agent was smoking. But money earned from a hubby is 100% taxable.
*hobby
I don’t know what your IRS agent was smoking but income from hobbies are 100% taxable.
He’s right. I’m sure that’s changed. 20 years ago my father, A’H, used to collect (buy and sell) watches and use Paypal and they allowed it as a hobby.
I remember looking into it when the law came out, zelle said that it doesn’t apply to them because they are direct bank to bank. PayPal and venmo payments to family and friends would have to be marked as non-business (if you didn’t know about it too bad…) I also remember seeing that it applies to 600 over the year, not just in one transaction, did something change?
Hmmm. Why is Zelle now taking 3 to 5 days instead of minutes. All ACH transactions, including PayPal can go in minutes because everything goes through the Federal Reserve Fed Net. Anything that doesn’t means the bank is floating your money on their investments.
The 87,000 new agents are to go after your $600 transactions while ignoring the guy stealing $10 billions dollars.
Oy vay iz Mir! All the free money everyone got from PPP and Unemployment during COVid is coming back to haunt all of you. Did you think for a moment that it’s really free? The Government now needs to be paid back for all of those disbursements. They got their votes now they need to be paid back.
Government running after pennies!- so they are running after unreported possibly at most 2k. Of those 2k – most of it very likely can be written off as expenses – cost of goods, shipping etc. So they end up with let’s say 500 in profit let’s say your tax bracket is 30 percent so the government just made 150.00 Wow this is money! Even if they have multiple 1099k so it’s 500.00? What a waste of everyone’s time and money! And the poor fellow who just made 600.00 and his profit was 50.00 got to file this extra form so the IRS can make 15.00! Wow we’re really cutting down on the tax cheats!!
The IRS may be in for a surprise – All these people who never claimed business expenses may start calculating all kinds of deductions from their home office to gas expenses etc… These people may end up coming out ahead with thousands of $’s in business expenses which will lower their entire tax bill!! Expenses they never bothered to claim!