Third-party payment processors, including Venmo, PayPal, and Cash App, will be required to report business transactions of users exceeding $600 a year to the Internal Revenue Service, according to a new tax law going into effect in January.
Previously, third-party payment apps were only mandated to notify the gross income of users who had over 200 distinct transactions or exceeded $20,000, according to a report.
The new change is the product of the American Rescue Plan, which passed in March 2021.
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The form to report the information is Form 1099-K, which records services transactions and goods acquired in a calendar year to the IRS.
The new tax law, the $600 rule, will apply to all payments received for service payments and goods, according to the report.
It will not apply to individuals who use a third-party system to send a gift to an individual or for acts like paying someone back for buying dinner, the report noted.
“You may notice that in the coming months we will ask you for your tax information, like a social security number or tax ID, if you haven’t provided it to us already, in order to continue using your account to accept payments for the sale of goods and services transactions and to ensure there aren’t any issues when these changes take effect in 2022,” PayPal said.
“This helps us meet our obligations to the IRS and ensures that you will be able to continue using your account and access PayPal and Venmo features and services.”
Individuals will be given the forms for this year’s transactions next year, according to the report.
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Forms for 2022 income taxes will be due in April 2023, the report noted.
