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 kicks off.
23ABC spoke to Amanda DiGiacomo, owner of Atlas Financial Solutions, who said the IRS recently delayed a requirement that those whose transactions totaled more than $600 would receive a 1099-K.
That amount was announced by President Biden when he signed the American Rescue Plan in 2021. The lower threshold was intended to accommodate some Americans who didn’t fully report their income.
The delay means the current rule, which requires a Form 1099-K when reporting transactions through mobile payment services, remains at the $20,000 baseline.
Another tip when it comes to mobile payment services if you are a business owner is to keep business and personal finances separate.
“So everything has to go in and out of a business checking account or a checking account that is dedicated to the business. And so revenue needs to flow in and out including Venmo, PayPal, Stripe, Cash App. So everything needs to be connected to the business app,” said DiGiacomo. “And if you’re using those third-party apps, you need to make sure you have a separate third-party app that’s (for) your personal (transactions) so that when your friends refund you things or lunch or something like that, you do it again is not included in your sales for your 1099-K.”
And even if you’re not a business owner, according to DiGiacomo, there are some important things to consider when using 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 had to resell them and I sold them at a price that is now profit from that sale. And so I was told that they are tracking this on Venmo. And I’ll give 1099-K for that, too,” DiGiacomo said. “Also, they’re looking for people who use Venmo and pay monthly rent, as well as through Venmo. So I would be cautious, even if you don’t have a business and you’re an individual using Venmo to pay for a good or service.”
The IRS also plans to lower the threshold for reporting mobile payment service transactions on a 1099-K. This change will take effect for 2023 tax returns.
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DiGiacomo is the host of the Our Two Cents podcast, which educates listeners on everything from preparing for tax season to complying with HR regulations.
