A new IRS rule set to take effect in 2022 will impact businesses that use treasury apps like Venmo, Zelle and PayPal, as various news outlets are reporting.
An ABC Action News report said the new rule allows the IRS to take a closer look at business transactions of cash applications of $ 600 or more. The previous threshold was $ 20,000.
According to a report from WDSU 6, the change in the way third-party payment networks report money exchanged on these platforms was brought about by the language of the US bailout.
The change will primarily affect businesses that receive payment through any of the treasury apps. Currently, these applications are required to send tax forms to users “if their gross income [paid through the app] is $ 20,000 or more, or if they have 200 separate transactions in a calendar year, ”noted WDSU 6.
Personal use transactions will not be affected, Action News said. But when self-employed people use the same cash application account for personal and business transactions, the line can get “blurry.”
The change affects the way transactions are reported, it does not change what is taxable and deductible, WDSU 6 clarified. ‘a business’, so if you are audited you will have proof that the money is taxable or not.
Sofia Johan, associate professor of finance at Florida Atlantic University, supports this advice, urging business owners who use treasury applications to keep good records of all taxable and non-taxable transactions. Johan further recommends setting up a separate account for business transactions, according to ABC Action News.
Those who fall within the threshold for business transactions of cash applications of $ 600 or more will receive a Form 1099-K, noted Action News.