BAKERSFIELD, Calif. (KERO) — If you're a small business owner who relies on third-party apps like Venmo, Square or PayPal for your transactions, there’s a recent change you need to be aware of as tax season gets underway.
23ABC spoke with Atlas Financial Solutions Owner Amanda DiGiacomo, who said the IRS recently delayed a requirement that stated those whose transactions amounted to more than $600 would receive a Form 1099-K.
That amount was announced by President Biden when he signed the American Rescue Plan in 2021. The lowered threshold was designed to catch some Americans who were not fully reporting their income.
The delay means the current rule that requires a Form 1099-K when reporting transactions through mobile payment services remains at the starting figure of $20,000.
Another tip when it comes to mobile payment services if you’re a business owner is to keep business and personal finances separate.
“So, everything needs to go in and out a business checking account or a checking account that's for the business. And so, income needs to go in and out of that, including Venmo, PayPal, Stripe, Cash App. So, all that needs to be connected to the business app,” DiGiacomo said. “And, if you are using those third-party apps, you need to make sure that you have a separate third-party app, that's (for) your personal (transactions), so that again, when your friends reimburse you for things or lunches or things like that, it's not included in your sales for your 1099-K.”
And, even if you're not a business owner, DiGiacomo says there are several important things to keep in mind if you use third-party apps for transactions like collecting rent or selling concert tickets.
“But, let's say I got the Morgan Wallen tickets, and then I, you know, needed to resell them, and I sold them at a price that's now gains on that sale. And so, I've been told that they're tracking that on Venmo. And going to be giving a 1099-K for that as well,” DiGiacomo said. “In addition, they’re looking for people who are using Venmo and paying rent monthly, like through Venmo, as well. So, I would be cautious, even if you don't have a business and you're an individual using Venmo and you're using it to pay for a good or service.”
The IRS still plans to lower the threshold to report transactions from mobile payment services on a 1099-K. That change will take effect for 2023 tax returns.
DiGiacomo is a host on the “Our Two Cents” podcast, which educates listeners on everything from tax season preparations to HR compliances.
