The United States Internal Revenue Service (IRS) warns users to report payments in Venmo, Cash App, or Paypal of at least $600 earned via side hustles.
According to the IRS, those who are working gigs in addition to a full-time job should file the tax form 1099-K to report their revenue. If you don’t, the tax collection agency may conduct an audit.
According to tax expert Lisa Niser, the worst-case scenario for individuals who fail to report their income to the IRS is that they will be audited and may incur fines and interest.
The modification aims to crack down on Americans who underreport their gross income in order to avoid paying taxes. However, many claim that it represents the worst kind of governmental overreach and that it could ultimately harm small enterprises.
Each third-party payment platform you used to receive transactions should be required to send you a Form 1099-K, according to the IRS.
The IRS advises contacting the payment platform for a correction or to provide an explanation with your tax return if you obtain the form for personal transactions inadvertently.
Formerly, if a user’s gross revenue exceeded $20,000 or if they had 200 distinct transactions during a calendar year, the payment apps had to issue them a Form 1099-K.
The use of Venmo or PayPal to send a loved one a present, pay your roommate’s rent, or reimburse a friend for dinner will not be covered by the new law because it only applies to payments received for goods and services transactions.
Users may be required to enter their Employer Identification Number (EIN), Individual Tax Identification Number (ITIN), or Social Security Number (SSN) if it isn’t already on file in the near future in order for the payment apps to properly report transactions.
Anyone who obtains money from selling a personal object at a loss is also exempt from paying taxes; for instance, if you bought a couch for $300 and sold it for $250, the difference is not taxable.