New tax laws are changing the way people who use payment apps have to file their taxes.
Taxpayers who use payment apps like Venmo, Cash App, PayPal and Zelle, which are also known as third-party settlement organizations, are now required to report business transactions that total more than $600.
If you use payment apps for things like paying family and friends for dinner, gifts, etc. this new tax law doesn’t apply to you.
This new provision only affects businesses that accept payment cards or use third-party network settlement organizations for payment of goods and services, according to the Internal Revenue Service.
Taxpayers who have exceeded the $600 threshold for 2021 should expect to receive Form 1099-K from whatever third-party settlement organizations they use.
According to the IRS, “gross amount of reportable payment transactions for the calendar year and its corresponding months are required to be reported for each payee.”
Venmo users can expect to be notified when their tax documents are available sometime in January, according to a press release. The documents are expected to be available for download directly from Venmo.
The new threshold for reporting these payments is significantly smaller than the previous $20,000-payment limit.
“Reporting and declaring any income, either personal or through a business, has always been a requirement when filing your taxes with the IRS,” Paypal officials said in a press release.
Changes to the tax code for reporting payments using these apps were introduced in the American Rescue Plan Act of 2021.