With tax season just around the corner, the IRS is now requiring Americans to report certain Venmo and PayPal transactions when filing.
The IRS reminds tax filers to report transactions of at least $600 that are made through third-party facilitators. Such examples of third-party transactions include Venmo and PayPal.
Tax-payers will receive a 1099-K form by January 31st if they received payments from all payment card transactions. These are debit, credit, or stored value cards. This also includes in settlement of third-party payment network transactions above the minimum reporting thresholds. And gross payments that exceed $20,000 and more than 200 such transactions.
The IRS also stated, “For transactions made after March 11, 2021, the American Rescue Plan Act of 2021 clarifies Form 1099-K reporting by third party settlement organizations applies only for transactions for the provision of goods or services settled through a third party payment network.”
The IRS further explains that the 1099-K includes the gross amount of all reportable payment transactions. Taxpayers will receive a form for each payment settlement entity from which they received payment. “A reportable payment transaction is defined as a payment card transaction or a third party network transaction.”
The IRS further explains that it is important for business books and records to reflect the filer’s business income. This includes any amounts that may be reported on a 1099-K. “You must report on your income tax return all income you receive. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments. Business income is generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return.”
IRS Warns That Tax Refunds May Be Smaller This Year
According to WANE, the IRS is now warning that the 2022 tax refunds may be smaller than in years past. This is due to recent changes to the tax codes.
The agency also stated that those who take the standard education instead of itemizing their taxes will not be able to deduct their charitable contributions. 2021’s American Rescue Plan Act also lowered the reporting threshold for third-party networks that process payments for business.
Meanwhile, IRS reported that for those claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) will not have their returns issued until mid-February. This is due to the law requiring the agency to hold the entire refund to investigate any fraud.
The media outlet went on to add that the IRS does acknowledge there were still 3.7 million unprocessed individual returns that it has received in 2022. This was reported as of November 11th.