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Some cash app transactions to be subject to taxes
Catherine Hawley reports
TAMPA, Fla. - The IRS is cracking down on business owners who use apps like Venmo, Zelle and PayPal to conduct transactions, but do not pay taxes on the income. A new rule will allow the federal government to take a closer look at business transactions on these apps when they are more than $600.
Such apps make it easy to split dinner, pay your share of the bills, or gift a pal some green. They're also convenient for business owners, who can collect payment in just a few clicks.
"The gig economy has changed the way America does business and because of that, the IRS is trying to keep up," said Dr. Robert Tiller of Raymond James Financial and director of the personal finance planning program at USF.
The American Rescue Plan Act of 2021 that passed back in March modifies the IRS reporting requirements for transactions using these cash apps. When the new rule takes effect on January 1, the apps will notify the IRS when payments top $600, triggering a 1099 form to be sent out.
"Regardless of the means of payment, if you're engaged in a business operation of any type and you receive payment, you're supposed to report the IRS, even if you hadn't been getting a 1099 of any type before," Tiller explained.
It is not a new tax. But some businesses owners have been getting away with keeping more money in their pockets since the apps haven’t been reporting to the IRS until transactions hit $20,000.
"It would definitely result in more people reporting income on their tax return. I'm sure there are people that are tempted when stuff is reported to the IRS to just not include it. So It will encourage compliance," said CPA Steve Osiason.
Cracking down on self-employed workers who are making income through the apps, not your personal use.
However, the line gets a little blurry when the same cash app account is being used for both personal and business transactions.
"They don't have any way of knowing whether you have your own individual side business or regular business that's just in your personal name," Osiason said.
"They're just trying to track who's getting paid where and if it's actual income, they want to tax it," added Tiller.
You will start seeing 1099 forms reporting cash app income in January of 2023.