The Internal Revenue Service has issued a new tax ruling that will force payment apps to record business transactions exceeding $600.
This new rule will allow the IRS to inspect small business transactions. Cash App, Venmo and Paypal, which are payment processors, will need to report transactions exceeding $600. All third-party processors of payment will be subject to the new rules.
Normaly, business owners report only this type of income through a 1099K. However, the IRS can now check transactions reported against records from third-party processors.
Based on Fox BusinessThis rule does not apply to gifts and property that have been sold at a loss.
PayPal released a press statement warning customers about this new rule.
PayPal stated that “The IRS can cross-reference our report as well as yours.” PayPal encouraged business users to consult with a tax professional to make sure the 1099-Ks correspond with the processor’s records.
PayPal said it could request more personal information about its users in the future to make sure users comply with the rule.
“In the coming months, we may ask you to provide tax information like your Employer Identification Number (EIN), Individual Tax ID Number (ITIN) or Social Security Number (SSN), if you haven’t provided it to us already,” PayPal said.
The rule isn’t applicable to the 2021 tax season. Small businesses must instead follow the rule for 2022 tax season.