Will You Owe Taxes With the New IRS Rule for Venmo, PayPal and Cash App Payments?
If you are a freelancer, a business owner or an occasional profitable person, you need to understand the requirements of PayPal, Venmo, CASH APP and other third -party payment users.
Third -party payment applications must be sent to you 1099-K tax table If you earn more than $ 5,000 on the platform in 2024. The change of this report will make the IRS clearly understand how much the income of your tax revenue this year to help ensure that you pay the tax correctly. For the 2025 tax year, the threshold will drop to $ 2,500.
The IRS initially formulated a plan to earn new report requirements for anyone with more than $ 600 through payment applications in 2023. After two years of delay, the tax institution has decided Implementation in stagesIncrease the report threshold to $ 5,000 in the 2024 tax year.
If you make money Freelance or self -employment incomeYou may be right 1099 tax tableEssence You need to report any Net income exceeds $ 400 When you give the National Taxation Bureau Submit the tax declaration formEven if you did not receive 1099.1099-K tax change, the report requirements for payment applications so that the IRS can retain better income, otherwise these income may have no report.
Jackson Hewitt chief tax information officer Mark Steber said: “The taxpayer’s tax and tax treatment requirements have not changed.” Report in the tax declaration form. “
The new 1099-K tax report rules are only applicable to your income from third-party payment applications. The U.S. Taxation Administration does not tax the money you send to friends or family members.
This is all information about the new 1099-K tax report.
Read more: The updated IRS federal tax level may increase the salary of next year. This is the reason
What is 1099-K?
one 1099-k is a tax The report reports the income obtained by the third -party payment platform through non -permanent work, such as the voiced hustle and bustle, the free professional agreement or the contractor’s position without deducting taxes.
The U.S. Taxation Administration currently needs any at present Third -party payment application Like Cash App and Venmo, if they get more than $ 20,000 in more than 200 transactions, they will send 1099-K for 1099-K. If you regularly earn more than $ 20,000 free income and pay more than 200 payment transactions through Venmo, you may have received a 1099-K tax form before.
What are the 1099-K rules of the 2024 tax year?
For your 2024 tax (you will submit it in 2025), the US State Taxation Agency is planning to be launched in the stage, requiring payment applications to report freelancers and business owners Income exceeds $ 5,000Essence Steber said: “Before 2024, the income tax amount was $ 20,000 and received 200 transactions.”
Why is the 1099-K tax rule of IRS delayed?
The U.S. Taxation Administration plans to start in early 2022 to plan to implement a new report rule. This rule requires third -party payment applications, such as BabeVENMO or cash applications earn more than $ 600 or more per year Taxation agencyEssence The IRS delayed this new report request in 2022 and delayed this new report again in 2023.
Why? It is not always easy to distinguish taxable and non -taxable transactions through third -party applications. For example, your roommate sent you money without tax levy for dinner through Venmo, but you may receive money for graphical design projects. The launch of delay provides more preparation time for the payment platform.
Danny Werfel, a member of the National Taxation Agency, said in the family: “We spent several months collecting feedback from third -party groups and other people. Implement new report requirements. ” Declaration in November 2023Essence
Which payment applications will send 1099-KS?
All third parties Payment application Liberty and business owners need to report to the US Taxation Agency in 2024. Some popular payment applications include PayPal, Venmo and Cash App. Freelancers may use other platforms, such as FivVer or UpWork, and are also linked to start reporting the payment received by Liberty throughout the year.
If you earn income through payment applications, it is best to set a separate PayPal, Cash App or Venmo account for your professional transaction. This may prevent unrelated cost-the money sent from family or friends-is mistaken for 1099-k.
There is a popular payment application to avoid 1099-K rules. Payment transfer service Zelle will not release 1099-KSWhether you get commercial funds through service. That’s because Zelle will not hold your funds in one account, such as PayPal, Venmo, or Cash App DO, but is used as a way to transfer funds between bank accounts. If you get a freelance or small enterprise service through Zelle, you are responsible for all income shall be reported in accordance with the tax declaration form attached table C.
How do you submit 1099-K?
You will include the income listed on the 1099-k Affiliated Table C (IRS form, report your business profits or losses). If you submit it with online tax software, it will guide you to report income.
Please be careful not to report your income. For example, if you get a free income of $ 10,000 from the customer, you may receive it 1099-NEC tax table For non -employee compensation for your income in detail. If the customer pays you through PayPal, you will also get 1099-K from the payment application with the same income. You don’t need to report your income twice.
If you often do not receive a tax meter from the customer, you can use the 1099-k of its position to ensure that you report your entire income. If you have the income of multiple customers, or worry about your 1099-K correctly, please contact the accountant to review your tax declaration form and income documents.
Do you tax on the IRS sent by your family or friends?
no. There are rumors that the IRS is breaking the money sent to family and friends through third -party payment applications, but this is not the case. Personal transactions involving gifts, discounts or reimbursement should not be taxed. Some examples of non -upper X -type transactions include:
- The money received from family members as a holiday or birthday gift
- The money received from a friend covering some of their restaurants bills
- The rent and public business share received from your roommate or partner
The payment reported on the 1099-K must be marked as the supplier’s goods or service payment. When you choose “remittance to your family or friends”, it will not appear on your tax. In other words, the money for half of the restaurant bills bought from my roommate is safe.
“This is only for self-operating income.” “You should not receive 1099-K for personal transactions, but please note that some platforms may accidentally include personal transactions in 1099-K, and need Correct the user tax declaration form “”
Read more: Election in 2024: Each presidential candidate stands at children’s tax credits
Is this rule suitable for products sold on Facebook or Poshmark?
If you sell personal items below payment and collect funds through third -party payment applications, these changes will not affect you. For example, if you buy the sofa of the house for $ 500, and then sell it at the Facebook Marketplace at a price of $ 200, you will not owe taxes because this is your personal item at a loss. You may need to display the original purchase document to prove that you sell the product at a loss.
If you have a busy place to buy items and via PayPal or Another digital payment applicationThe income of more than $ 5,000 will be considered taxable and reported to the State Taxation Bureau in 2024. Make sure you keep your purchase and online transactions good records to avoid paying taxes on any non -mobile income, and contact tax professionals to seek help with tax professionals when doubt.
What if you have an error 1099-k?
Now, the tax season already exists, and you may receive 1099-k instead of income. For example, if your roommate pays you $ 1,000 through Venmo every month, Venmo may send you 1099-K at a revenue of $ 12,000. In this case, the U.S. Taxation Administration stated that you should contact the payment platform and use the phone number in the left corner of the form to inform them of their errors.
You should then get a corrected 1099-k. If you have not corrected 1099-K before the deadline for tax applications, you can still submit the tax declaration form. State Taxation Bureau said Follow these three stepsThe
- Report Affiliated Table 1, Part 1, Part 8Z Part 1: The amount of other incomeEssence List it as “the wrong 1099-K form” and then add the total amount. The above example will be “$ 11,000”.
- Adjustment of Table 1, Part 2, Line 24Z: Other adjustments. List it as “the 1099-K form that is received” and lists the amount.
- Keep your 1099-k copy RecordEssence Keeping this problem in case the State Taxation Bureau has any questions.
Following the above process, the wrong 1099-k will be canceled. However, if the IRS believes that the income is legal, it may be marked or reviewed by your income. If you have any questions, please contact tax experts.
