IRS tax rules on Venmo, PayPal payments over $600

UPDATE: On Friday, Dec. 23, the IRS announced it is delaying a rule by one yr that may require cost apps comparable to Venmo, PayPal and Cash App to report sure transactions of greater than $600 to the IRS. The authentic story continues as printed under:

As of Jan. 1, 2022, individuals who use cost apps like Venmo, PayPal and Cash App are required to report sure transactions that whole greater than $600 to the Internal Revenue Service. 

VERIFY viewer Cindi emailed us to ask if this implies something over $600 must be reported to the IRS. On social media, persons are additionally speaking about what’s required to be reported by users of these apps. 

Are all cost app transactions over $600 required to be reported to the IRS?

Sign up for the VERIFY Fast Facts day by day Newsletter!

No, not all cost app transactions over $600 must be reported to the IRS. Income is required to be reported, however you might need to show a transaction was not earnings in case you obtain a 1099-Okay kind.

Users of third-party applications, like Cash App, Venmo or PayPal, solely need to report transactions over $600 to the Internal Revenue Service (IRS) whether it is thought-about earnings that may usually be reported anyway. 

For instance, in case you accepted an app cost of $600 or extra for a service or product – that’s thought-about taxable earnings. Friends and household transactions, like lease payments or dinner reimbursements, aren’t taxable earnings.

Each respective cost app sends an IRS 1099-K form, a kind used to report any taxable earnings paid by means of third-party functions, to customers in the event that they recorded greater than $600 in earnings utilizing the app.

More from VERIFY: Yes, customers of money apps will get a 1099 kind if annual industrial payments are over $600

The IRS says in case you get certainly one of these kinds, however the cash you acquired just isn’t thought-about earnings, you’ll have to succeed in out to the cost app for a correction.

“Remember, money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. Those who receive a 1099-K reflecting income they didn’t earn should call the issuer. The IRS cannot correct it,” the company’s web site says. 

According to PayPal’s website, the corporate supplies a listing of transactions they embrace within the calculation of whole product sales for items or companies. This reconciliation report is supplied within the consumer’s PayPal account below the “Tax Documents” part. 

If there are corrections that must be made, or there are gadgets on the report that must be disputed, the consumer has to contact PayPal instantly. 

“Let us know the transactions that you didn’t receive for sales of goods or services. We’ll need the specific transaction IDs for each payment you believe we shouldn’t include,” PayPal says. 

“We don’t report payments such as personal payments sent to family or friends. ” the web site provides.  

PayPal will then examine the transactions to confirm they aren’t business-related and upon verification, they may challenge new kinds. 

PayPal owns Venmo, so the process for that app is similar. Venmo points tax paperwork electronically and if somebody must request an replace to their tax kind, they should contact Venmo directly to make any changes.

Cash App says 1099-Okay kinds are solely despatched to these customers with Cash for Business accounts, which implies you probably have a private Cash App account, you gained’t get a 1099-Okay and thus, “Cash App will not report any of your personal transactions to the IRS.” 

According to a blog post from Intuit’s TurboTax, if somebody doesn’t discover their 1099-Okay kind was incorrect, and nonetheless recordsdata their taxes as regular, they’ll file an amended return. The IRS requires a letter of clarification outlining which of the transactions had been private and weren’t earnings.