Obviously, it’s more than young folks who use lots of these payment apps, but, they compromise the biggest chunk. Of 10.2 million users (2017 numbers, can’t find anything newer), 7.4 million are under 34. A lot of these younger folks are about to get a big lesson in government intrusion
If you use Venmo, PayPal or other payment apps this tax rule change may affect you
If you’re among the millions of people who use payment apps like PayPal, Venmo, Square, and other third-party electronic payment networks, you could be affected by a tax reporting change that goes into effect in January.
Payment app providers will have to start reporting to the IRS a user’s business transactions if, in aggregate, they total $600 or more for the year. A business transaction is defined as payment for a good or service.
Prior to this change, app providers only had to send the IRS a Form 1099-K if an individual account had at least 200 business transactions in a year and if those transactions combined resulted in gross payments of at least $20,000.
The expansion of the reporting rule is the result of a provision in the American Rescue Plan, which was signed into law earlier this year. The ultimate aim of the provision is to clamp down on unreported, taxable income. (snip)
The rule change also does not make other transactions suddenly taxable. For instance, your friend sending you money on Venmo to reimburse you for their half of last night’s dinner tab will not become taxable.
The biggest change is the increased visibility the IRS will have into business income transactions, both those that have always been reported by the income recipient and those that haven’t been.
The IRS is now going to have an easier view of the transactions of most people who use these apps, because most will surely hit the $600 threshold. Remember when Democrats told us that they wanted to go after The Rich, not everyone else? How’s that working out, younger folks who voted Democrat?
In theory, the only people who should be worried about the rule change are those who weren’t reporting all their business income in the first place. In other words, “those who are tax evaders, who violated the self-reporting rules and utilized the old thresholds to avoid paying taxes,” said Scott Talbott, spokesman for the Electronic Transaction Association.
Yeah, so, going after low hanging fruit.
But in reality, tax experts say, the threshold change could mean some administrative hassles for many tax filers who use payment apps, whether or not they’re engaged in business transactions.
“These third-party settlement entities may not know for sure if they are dealing with a business or an individual or if they are dealing with a payment for goods or services, or a non-taxable transaction. It is going to be up to the taxpayer, if they receive a 1099 in any form for a nontaxable event, such as splitting rent among roommates, splitting a dinner bill, or even selling something on eBay for less than you paid for it, to explain to the IRS that the 1099 was received for a non-taxable transaction,” said Mark Luscombe, principal analyst for tax publisher Wolters Kluwer Tax & Accounting.
Is it any wonder why Biden’s agenda includes way more funding in order for the IRS to hire a lot more agents? The reconciliation bill would reportedly add 87,000 new agents. Which seems a crazy number, when the IRS only has around 74,000 employees now. So, let’s do something we do in the the sales world: cut it in half. Let’s say it’s only 43.5K. Too much? 21.75K. How’s that number work for you? Think they’re just going after rich folks?
