“These third-party settlement entities may not know for sure if they are dealing with a business or an individual or if they are dealing with a payment for goods or services, or a non-taxable transaction. In other words, “those who are tax evaders, who violated the self-reporting rules and utilized the old thresholds to avoid paying taxes,” said Scott Talbott, spokesman for the Electronic Transaction Association.īut in reality, tax experts say, the threshold change could mean some administrative hassles for many tax filers who use payment apps, whether or not they’re engaged in business transactions.
In theory, the only people who should be worried about the rule change are those who weren’t reporting all their business income in the first place. The biggest change is the increased visibility the IRS will have into business income transactions, both those that have always been reported by the income recipient and those that haven’t been. For instance, your friend sending you money on Venmo to reimburse you for their half of last night’s dinner tab will not become taxable. The rule change also does not make other transactions suddenly taxable. Income you receive for a good or service - including tips - has always been reportable and in many instances taxable.Īnd you’ve always been responsible for reporting it on your tax return, regardless of whether a third party sends the information to the IRS. Keep in mind, the new reporting threshold does not change your basic tax responsibilities. The ultimate aim of the provision is to clamp down on unreported, taxable income. The expansion of the reporting rule is the result of a provision in the American Rescue Plan, which was signed into law earlier this year. Prior to this change, app providers only had to send the IRS a Form 1099-K if an individual account had at least 200 business transactions in a year and if those transactions combined resulted in gross payments of at least $20,000.
0 kommentar(er)
