GREENSBORO, N.C. — Cash, credit card, check. A lot of folks are replacing these with a third-party apps like Venmo, Pay Pal, Cash App, Zelle, Apple Pay, and Google Pay.
If you have a side business, it's an instant way to get paid cash. Now, the IRS wants to know who is giving you how much, and why.
“Those apps are going to be required to report anything over $600 to the IRS and you will get a 1099-K form and you'll have to report it on your taxes and pay taxes on your income,” said JW DeGance, Jackson Hewitt.
The 1099-K is the IRS form you'll get in the mail. Chances are, you’re going to get one even if you don’t have a side business.
You may just split bills with friends and get one of these.
Does that mean you'll have to pay taxes on it?
No. DeGance says tax software or a professional will guide you.
“It will ask you, did you receive any money through third-party apps, they'll be a question if you got a 1099-K and then you'll have to describe what it is,” said DeGance.
It used to be the third-party apps only reported amounts of $20,000 or higher. That threshold has now been lessened to $600.
If you do you do have a side gig, it's important to not accept payments for personal expenses on the same account you use for business.
What about if you sell things on Etsy or Ebay? How about that Holiday Craft Show? Here's what the IRS says:
If you accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of proceeds for the goods or services purchased from you through the use of a payment card in a calendar year. Further, if you accept payments from a third-party settlement organization, you should receive a Form 1099-K from that organization only if:
- The total number of your transactions exceeds 200
AND
- The aggregate value exceeds $20,000 in a calendar year.
Effective for returns for calendar years beginning in 2022:
If you accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of the payments made to you through the use of a payment card during the calendar year. Further, if you accept payments from a third-party settlement organization, you will receive a Form 1099-K from that organization only if the aggregate amount of payments for goods and services exceeds $600 during the calendar year.