CORPUS CHRISTI, Texas — The IRS recently announced a delay in reporting thresholds for third-party payment apps, according to a report from Forbes.
The 2022 tax year will instead be a transitional period for the implementation guidelines. The period is meant to help tax payers learn the new guidelines to better prepare them for the 2023 tax year.
Anyone with more than 200 business transactions or an income of at least $20,000 through third-party apps have always been subject to taxes, according to Cash App, but with the changes to The American Rescue Plan Act of 2021, that reporting threshold is now significantly lower.
Now, taxpayers using PayPal, Venmo and Cash App will have to file 1099-K forms on transactions totaling $600.
"The biggest thing is going to be that they're basically cracking down on income, on unreported income, that's what they're choosing to go after right now," said Danny's Income Tax Service owner Stacy Trevino
Trevino said that while contracted workers are already obligated to report their income to the IRS, the focus on payment apps make the process more detailed.
"This is huge because it used to be over $20,000 now it's $600," she said. "So it's affecting everyday Americans, hair stylists, resellers -- it's affecting them all."
Payment apps will send a 1099-K form to users who have received more than $600 in income through their respective app. Trevino said that residents can also receive the form whether they used it for business purposes or just to reimburse others. Even a single transaction exceeding $600 can trigger a 1099-K, according to the IRS.
"If you’re reimbursing your roommate for your share of the rent, that won't be taxable," she said.
With income guidelines for payment apps differing from previous years, Trevino said that residents might have to reach out for a correction with their respective app over which payments actually constitute a business sale.
"If you take a friend out to lunch and they pay you back, that is not taxable," she said. "It's not gonna affect anybody who uses it for reimbursements, or it should not. Problem is, this is the first year that this is happening. So we have to count on Cash App, Venmo, knowing what they’re doing."
For Sleight Productions' owner Jake Gonzales, payment apps make up a majority of his income. Gonzales said that the apps don't just make collecting payments easier, but also help him keep digital records.
"All the time," he said. "I constantly use Cash App, Venmo, PayPal especially because that's how I send my invoices out."
Gonzales told 3NEWS that before the threshold limit was lowered, filing his taxes was already difficult. Now, he says that he will have to be more detailed when reporting his annual income.
"In that sense, it just makes me wanna be a lot more careful because submitting your taxes as a contractor -- you already have to be really specific about how you put it in," he said.
Trevino warns residents that not reporting your income accurately can have steep consequences, which could include additional penalty and interest fees.
“You'll get a letter from the IRS that states you owe your tax liability," Trevino said. "They'll tack on penalties and interest, so it’s not gonna go away, it's only gonna get worse."
While residents have some breathing room, Trevino said that if they have any concerns about filing their taxes to call a professional and set up an appointment.
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