Fact or fiction: The IRS wants to know about your Paypal and Venmo transactions in 2022 - CNET

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If you're self-employed oregon person a broadside hustle and get paid done integer apps similar PayPal, Cash App oregon Venmo, immoderate net implicit $600 volition present beryllium reported to the IRS. A proviso from the 2021 American Rescue Plan, which went into effect connected Jan. 1, directs third-party outgo processors to study transactions received for goods oregon services totaling implicit $600 per twelvemonth to the IRS. 

Prior to this legislation, a third-party outgo level would lone study to the taxation bureau if a idiosyncratic had much than 200 commercialized transactions and made much than $20,000 successful payments implicit the people of a year. 

This caller instrumentality won't use to your 2021 taxes, which you'll record this taxation season. But it volition use to the net you marque passim 2022, which you'll study erstwhile you record successful 2023. 

There's a batch of speech online astir this caller taxation reporting request and if you gain wealth done a integer outgo app, you whitethorn beryllium confused astir what's existent and what isn't. Let's abstracted the information from the fiction.

Read more: Don't place these 13 taxation deductions and credits successful 2022

Fact: This isn't a taxation change, it's a reporting change

If you're self-employed, you should already beryllium paying taxes connected your full income, careless of however you person your payments for goods and services. The caller authorities is not a taxation alteration -- it's a taxation reporting alteration truthful the IRS tin support tabs connected the transactions made done outgo apps that often spell unreported. 

Going forward, third-party outgo companies volition contented you a 1099-K taxation signifier each twelvemonth if you gain $600 oregon much annually successful income for goods oregon services. This taxation signifier mightiness see taxable and nontaxable transactions, peculiarly if the relationship is for some concern and idiosyncratic use. 

The IRS volition besides person a transcript of the taxation signifier and won't beryllium relying purely connected self-reporting. "The IRS volition beryllium capable to cross-reference some our study and yours," Paypal noted successful a November 2021 press release.

To marque managing your concern finances easier, we urge creating abstracted PayPal, Zelle, Cash App oregon Venmo accounts conscionable for your nonrecreational finances.

Read more: Estimated taxes for 2022: What they are, who needs to wage them, and erstwhile they're due

Fiction: The IRS is counting wealth you nonstop to household and friends

Rumors person circulated that the IRS was cracking down connected wealth sent done third-party outgo apps to household and friends, but that isn't true. Personal transactions involving gifts, favors oregon reimbursements are not considered taxable. Some examples of nontaxable transactions include: 

  • Money received from a household subordinate arsenic a vacation oregon day gift
  • Money received from a person covering their information of a edifice bill
  • Money received from your roommate oregon spouse for their stock of the rent and utilities

Fact: Payment apps whitethorn beryllium requesting taxation accusation from you

Now that this caller instrumentality is successful effect, outgo apps similar PayPal whitethorn beryllium reaching retired to you to corroborate taxation information, specified arsenic your leader recognition number, idiosyncratic taxation recognition fig oregon Social Security number. If you ain a business, you astir apt person an EIN, but if you're a sole proprietor oregon idiosyncratic freelance oregon gig worker, you'll supply an ITIN oregon Social information number. 

Read more: Doing taxes connected your phone? Better work this first

Fiction: Personal items sold astatine a nonaccomplishment volition beryllium taxed

If you merchantability idiosyncratic items for little than you paid for them and cod wealth via third-party outgo apps, this caller authorities won't interaction you. For example, if you bargain a sofa for your location for $500 and aboriginal merchantability it connected Facebook Marketplace for $200, you won't beryllium taxes connected the sale. That's due to the fact that it's a idiosyncratic point you've sold astatine a loss. However, you whitethorn beryllium required to amusement documentation of the archetypal acquisition to beryllium that you sold the point astatine a loss.

But, if you person a broadside hustle wherever you bargain items and resell them for a nett via PayPal oregon different integer outgo app, past net implicit $600 volition beryllium considered taxable and reported to the IRS. 

Make definite to support a bully grounds of your purchases and online transactions to debar paying taxes connected immoderate nontaxable income -- and erstwhile successful doubt, scope retired to a taxation nonrecreational for help.

Read more: Best taxation bundle for 2022: TurboTax, H&R Block, Jackson Hewitt and others compared

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