The IRS is warning Americans that Venmo, PayPal, Cash App and other third-party payment networks must report payments of $600 or more to the IRS and taxpayers must report them on their 2022 tax return.
According to the agency, taxpayers should receive a Form 1099-K, Payment Card and Third Party Network Transactions form by Jan. 31, 2023, if they received third-party payments in the tax year 2022 for goods and services that exceeded $600.
Prior to 2022, Form 1099-K was issued for third-party networks transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of the transactions exceeded $20,000.
The threshold for reporting third-party transactions was lowered in the American Rescue Plan Act of 2021, to $600. The information is reported on Form 1099-K. Form 1099-K is used to report goods and services payments received by a business or individual in the calendar year, to the IRS.
The $600 rule applies to payments received for goods and services transactions. For instance, if you sell products on Etsy or eBay, you will get a 1099-K form if you sell more than $600 worth of products.
Money received through third-party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. Also, if you sell something at a loss — for instance, you purchased a bike for $800 and sold it for $700, the amount is not subject to the new law.
“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 as these changes take effect in 2022,” PayPal said in a blog post last year.
“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,” the post continued.
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