The IRS has new ways to tax cash app transactions

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WASHINGTON, DC (KERO) — The IRS has devised new ways to tax cash app transactions, but misconceptions could leave some confused about who these changes apply to.

Starting this year, businesses and individuals accepting payments through cash apps like Venmo, PayPal, Cash App, and Zelle will now need to keep an eye out for 1099-K forms. This is because the IRS will keep a watchful eye on small business cash application transactions.

As part of the American Rescue Plan Act, cash apps will now earn trade revenue over $600. Previously, these business transactions were reported only if they exceeded $20,000 at the end of the year.

Cash app users should be aware that this new rule only applies to commercial transactions. Those who use apps to send money for personal reasons, buy items or pay bills will not be affected. However, people selling products on apps or websites like Etsy or eBay may now have to report those transactions on their taxes.

For small businesses that rely on cash apps, financial advisors recommend differentiating between apps used for business transactions and those used for personal purposes.

Cash app users can also expect to now clarify the nature of transactions made and received. And regardless of the size of the business or service, it’s a good idea to report all income to the IRS. If the total remains low enough, reports indicate that you are unlikely to owe taxes on it.

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