Starting this year, business users of payment platforms such as Cash App, PayPal and Venmo and will now be required to report income to the IRS if they made $600 or more.
These platforms will send the user a forum 1099-K and will send the IRS a copy so they can cross reference the one taxpayers file with the one the payment platform files.
“The IRS requires TPSOs (Third Party Settlement Organizations), such as PayPal and Venmo, to issue a Form 1099-K, which shows the total amount of payments received from a TPSO in the calendar year,” PayPal said in a press release.
This law will only apply to business accounts on these payment platforms. Personal use such as paying rent or paying back a friend for dinner doesn’t need to be reported to the IRS.
Zelle is exempt from this reporting because they do not directly handle funds like how Cash App, PayPal or Venmo do.
“If payments you receive on the Zelle Network are taxable, it is your responsibility to report them to the IRS,” Zelle’s website said.
Before this change to the tax code under the American Rescue Plan, the COVID response bill passed last March, these platforms only reported earning to the IRS if the user had over 200 transactions and a gross total greater than $20,000. Taxes filed for 2021 will follow this guideline while earning starting Jan. 1 of this year will be subject to the new law. Users are encouraged to check with the platform they use for details on how to file.