PayPal Logo In a letter sent Wednesday, U.S. House Speaker Johnson was urged by Florida Chief Financial Officer (CFO) Jimmy Patronis to postpone t
In a letter sent Wednesday, U.S. House Speaker Johnson was urged by Florida Chief Financial Officer (CFO) Jimmy Patronis to postpone the rollout and halt the IRS from issuing Form 1099-Ks via third-party cash apps like PayPal, Venmo, and Cash App.
If customers use a third-party payment platform to transact $600, they will have to submit a Form 1099-K to the IRS after January 1.
“It is my understanding that with the Continuing Resolution (CR) bill that passed yesterday, there were no policy advances secured. To avoid a shutdown, you bought time and I’m hopeful you will start working on a more conservative budget package. After the holidays, the Internal Revenue Service (IRS) has made clear that consumers will be taxed if they make a transaction over $600 on a third-party payment platform, such as PayPal, Venmo or Cash App. This new reporting requirement should be front and center in your budget negations. There is still time to deliver to your constituents and force the IRS to delay their collection of taxes from cash-apps. This collection was supposed to start this year, but the IRS deferred collections for another year because the technology wasn’t ready,” said Patronis in his letter.
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According to The Coalition for 1099-K Fairness, over half a million Floridians will receive one 1099-K form, which is a 1,844% increase.
Patronis said this will “hit small businesses, parents selling kid’s clothing, church bake sales.”
“Moreover, the IRS has told these Big Tech companies to overreport as to avoid penalties. This is going to be a total disaster, and no one is ready for it. We have to buy time to undo this travesty. Let’s also keep in mind, these tax forms will hit Florida families while everything is more expensive due to inflation. Bidenomics has drained the bank accounts of hardworking Floridians, as well as retirees on fixed incomes, and the IRS is getting ready to kick people while they’re down,” said Patronis.
As part of the 2021 American Rescue Plan Act (ARPA), the IRS is requiring these electronic payment apps to report transactions totaling over $600 per year.
The ARPA change took effect on January 1, 2022, and third-party networks are gearing up for the new reporting responsibilities.
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Prior, the threshold was much higher, at $20,000, and you had to make over 200 transactions to qualify for reporting.
The IRS said if a person accrues more than $600 annually in commercial payments on a payment app like Venmo, then Venmo “must file and furnish a Form 1099-K” for them, reporting on all the commercial income they collected for the year through the app.
Form 1099-K is an IRS informational tax form that is used to report goods and services payments received by a business or individual in the calendar year.
While banks and payment service providers, like PayPal and Venmo are required by the IRS to send customers a Form-1099K if they meet the $600 threshold amount, there are certain amounts that may be included on the form that are generally excluded from gross income and therefore are not subject to income tax. This includes:
- Amounts from selling personal items at a loss
- Amounts sent as reimbursement
- Amounts sent as a gift
So, for example, if you purchased a couch for $1200 and sold it for $800, this amount would not be subject to income tax.
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Both PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as either personal/friends and family or goods and services by choosing the appropriate category for each transaction.
Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service.
These transactions are also eligible for coverage under PayPal and Venmo’s Purchase Protection Program. Goods and services payments are designed to provide both buyers and sellers peace of mind knowing that they may be covered if the transaction doesn’t go as expected.
Reporting and declaring any income, either personally or through a business, has always been a requirement when filing your taxes with the IRS.
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