Social media users say anyone making annual transactions from cash apps over $ 600 will face new taxes. This is not true.
Some social media users criticized the Biden administration, the Internal Revenue Service and the US Treasury, saying new taxes would be levied on those who use treasury apps to process transactions. Indeed, after 2022, users of the application with a total number of transactions greater than $ 600 will be submitted to form 1099-K.
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VERIFY viewer Tina asked, “Next year, after sending $ 600 worth, will 1099 be sent to use money apps like Venmo and Zelle? “
Yes, if you receive more than $ 600 in your application, you might receive a Form 1099-K. But that doesn’t mean you are borrowing additional taxes. This only applies to income normally reported to the IRS anyway. Current tax laws require anyone to pay taxes on income over $ 600, regardless of where they come from.
Taxes do not apply to transactions between friends or family such as rent payments or dinner refunds.
What we found
NS 2021 American Rescue Planning Act fine IRS reporting requirements range from $ 20,000 for total payments and 200 transactions to a threshold of $ 600 for total payments with no minimum number of transactions. The new rules will take effect on January 1, 2022.
President Joe Biden signed the law The threshold was revised in March.
This report, using third-party apps like CashApp, Venmo, and PayPal, only applies to goods and services, not personal payments, like when someone pays for dinner.
David Super, a tax law professor at Georgetown University, told VERIFY in an email: He’s just looking to get a more honest report on his income and the deductible costs he’s incurring. “
“If you receive money as a gift or as a refund from a friend or family member, the effect will probably be the same and there is no income to count. On the other hand, you use a cash register receipt to collect business income. If so, you will have to report the receipts from these companies this way, ”says Super.
Steve Rosenthal, senior fellow of the Urban Brookings Tax Policy Center at the Urban Institute, told VERIFY that Congress is expanding the concert economics information on payments for services using the cash app. Those who use these apps will receive an information report and 1099-K and report their income.
“For example, Venmo should provide you with an information report and also inform the IRS that you have received a significant amount of receipts and that you are engaged in a significant number of transactions next year. Congress lowered the threshold to $ 600. So many people will receive information reports from Venmo and other cash facilities, ”Rosenthal said.
“This means that just because you receive an information report that says you have taxable income, you may not be able to make a profit, such as a sale transaction or an income-generating transaction, which is a transaction. personal rather than itself. No. “, he added. “Like my wife, I often get Venmo grocery payments from some of her girlfriends, and she makes those payments, and it won’t bring in any income. And even if my wife took such a form, she might ignore it. “
He said the IRS only controls a small percentage of taxpayers, and it will continue. But if someone gets a steady flow of money through the treasury app and it looks like it’s retail or income, “it’s more like that business income not reported to the IRS.” will do it “.
“The main hope is that businesses will voluntarily and accurately report their income once the receipts are more openly documented,” he said.
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