The Internal Revenue Service has mandated payment apps like Venmo, PayPal, and Cash App to report any commercial transactions over $600 starting Jan. 1.
The Internal Revenue Service said it will begin requiring payments apps such as Venmo, PayPal, Zelle, and Cash App to report commercial transactions over $600 each year, starting from January.
NBCNEWS reports that the new tax code was enacted in March as part of the Covid-19 response bill, the American Rescue Plan Act.
Read More: Taxpayers Will Begin to Receive $5,200 in Bonuses From IRS in 2022
These mobile payment apps had previously only been required to notify the IRS when a person had 200 or more commercial transactions annually worth more than $20,000.
According to IRS, these payment apps “must file and furnish a Form 1099-K” to any person who earned more than $600 in commercial payments through the app starting in January, the IRS mandated.
Tax-reporting changes apply only to charges for commercial goods or services, not to payments to friends and family, such as splitting a dinner bill.
In an explanation of the new tax rules, the IRS stated that these changes also affect people who use the internet auction sites like eBay and those who “have a holiday craft business” using apps that accept credit card payments.
PayPal announced that “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,” PayPal stated.