New IRS Rules For Cash Payment Apps
Let’s talk about a new tax coming in 2022. It’s not exactly a new tax but it's a new way that the IRS are going to keep tabs on your finances even down to your garage sales. I'll explain that in a second, so on January 1, 2022, new laws are being put into place that 1099 reporting will be implemented and it will be mandatory for payment platforms like Vimeo, cash app, and PayPal. What it means is that there will be a 1099 issued for anyone who receives $600 or more in transactions throughout the entire year. Currently, to give you an idea how different this is, a lot of people believe it’s normal but it's not normal for these payment apps. This is for anybody selling things or receiving payment on payment platforms like PayPal and that's $600 throughout the year total. Currently, to give an idea how big of a deal this is or how big of a change from the current rule it is, those payment platforms do not have to issue a 1099 unless at least $20,000 of transactions have happened throughout the year and in that $20,000 you would have to exceed 200 transactions or more on that account. This is going to affect everybody. Right now, many people out there just trying to make ends meet so people will have garage sales to make a little extra cash. It happens all the time with garage sales. There will be a garage sale, and someone says, “Hey do you take Venmo?” Now, think about this, that person selling items at a garage sale is now going be issued a 1099 if they sell over $600 worth of garage sale items using Venmo. They have to claim that as income and possibly if they do enough of it, they may be looking at audit down the road because the IRS is going say wait a minute do you have a business? If you do, that's subject to self-employment tax. Therefore, people need to understand what's going on. I get it there's a lot of people right now not paying taxes, but you didn't get to write off that old bedroom set that you just sold at a garage sale as an expense when you bought the bedroom set but now with this kind of reporting, you may have to claim it as income when you go to sell it at a garage sale. These are the times to start thinking ahead. I think it's so vitally important that people understand that this is happening. You can’t wait until January 2023 because it's too late to prepare. In 2022 alone you might have a garage sale with more than $600 worth of goods sold on one of these platforms. People may sell $600 or more worth of stuff on a payment app in early 2022 before they ever hear about this and guess what's coming to them in 2023? That's right! A 1099 and they must claim it as income. Many people are bordering a couple of different tax brackets, and this might come as a surprise in January 2023, or it might exclude some people from certain deductions because now they make too much. I think this is very important information but very few people seem to be aware of what is happening next year. Now you know. Stay safe and have a happy new year.
Gregory S. McKinney Mineola Texas
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