Cash apps like Venmo and PayPal now required to report $600+ transactions to the IRS
The change still only applies to commercial transactions, however.
The tax code in the United States just received a pretty major change surrounding mobile paying apps like Cash App and Venmo. Starting on January 1, these apps are now required to report any commercial transactions that total more than $600 in a year to the Internal Revenue Service (IRS).
We initially heard about this update in the tax code a few months ago. The change came as part of the American Rescue Plan Act of 2021. Initially, Venmo, PayPal, and similar apps were only required to report accounts with more than 200 transactions and $20,000 in a year. Now, the number has been greatly reduced to just $600, with no minimum number of transactions.
When we first heard about this new law back in October, a lot of people we nervous about what exactly this new law meant. Does it mean that we will start being taxed on money that we send to our friends and family via Venmo for personal things like splitting a dinner bill or an Uber ride?
Fortunately, that’s not how it works. Apps like Cash App or Venmo are required to report only commercial transactions that exceed the $600 threshold. So all of your personal transactions are still free from taxation. You might still get a 1099-K form from the app, but that won’t mean that you’re required to pay tax on that money.
One extra aspect to note in this change is that it also applies to things like eBay, where a payment settlement company is responsible for processing money transactions. The previous reporting threshold of 200 transactions and $20,000 has been greatly reduced to just $600, so people with online stores may also be subject to some extra taxes going forward.
Again, this change only applies to commercial transactions. The IRS is the worst federal government entity that we have in this country, but at least the agency hasn’t started coming after our personal transactions yet.
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