Per NY Post

The IRS is warning Americans about failure to report Venmo and PayPal transactions over $600. This is due to the 2021 American Rescue Plan Act, which changes how Form 1099-K is used.

Business owners that earn $600 or more per year (not per month) via Cash App, PayPal, or Venmo, will have to include Form 1099-K in their business income upon filing.

The IRS was not always that strict with the transactions over the $600 rule. In fact, before the American Rescue Plan Act of 2021, it had looser enforcement regarding its Form 1099-K.

Before the 2021 Act was passed, a Form 1099-K report was used for at least $20,000 total from at least 200 transactions. This made it more flexible for Americans as they could compile everything in the form.

The IRS says that as long as businesses earn $600 or more per year through apps, they will get a Form 1099-K. Per the agency, they are now looking to collect data regarding selling goods, side gigs, and even part-time work.

The implications of the new requirements won't apply to people spending on restaurants, shopping, or one-time payments for selling something, per CNBC. This means businesses will receive the form and not the basic consumers.

Businesses will get the form from each third-party payment platform they use. If they use Venmo, PayPal, and Cash App, they will receive three forms, one from each platform, respectively.

The administration remains optimistic about the 2021 American Rescue Plan Act, hoping it would close the tax gap and bring in an estimated $8.4 billion from 2021 to 2023, per the JCT.

Another article by CNBC explains that people could receive Form 1099-K for unexpected transactions like reselling tickets. Justin Miller, Evercore Wealth Management's national director of wealth planning, gave a statement expressing the risk it presents.

Miller: "The challenge with the new lower threshold... personal payments and reimbursements could be incorrectly reported as taxable transactions,”

Resources:

The New York Post

CNBC

CNBC

The Joint Committee on Taxation

See flow at unusualwhales.com/flow.