IRS warns Americans to report $600 transactions from payment processors or risk audit

The Internal Revenue Service is reminding taxpayers to report transactions of at least $600 through payment networks such as Venmo, Paypal and Cash App, as the agency seeks information on part-time employment and side gigs.

In a recent explanation posted online, the IRS said that under the American Rescue Plan Act of 2021, any payment made after March 11, 2021, must report that it exceeds $600. The new reporting rule targets small business owners and people who work side hustles or part-time gigs for extra income. Previously, the reporting limit was $20,000 and more than 200 transactions per calendar year. But the modified rule applies to one transaction.

“If you received payments from all payment card transactions (such as debit, credit, or store cards) and third-party payment network settlements in the previous calendar year, you must receive a Form 1099-K by January 31. operations exceeding the minimum reporting threshold,” the agency said.

The reporting rules do not apply to non-commercial payments, such as one-time transactions such as rent, vacations, meals, or selling something online. Form 1099-K will be sent by the payment platforms where the transaction was processed.

If the form was received in error, “Contact the Paying Entity (PSE) listed on the Form 1099-K,” according to the agency, or provide an explanation on the tax return.

Failure to report transactions on Form 1099-K may result in an audit by the IRS because the agency receives a copy of the form.

Personal Finance of American Citizens

The American Rescue Plan Act of 2021, or the COVID-19 Stimulus Package, is a $1.9 trillion economic plan passed by Congress and signed into law by President Joe Biden on March 11, 2021. The final amended bill passed the House with all but one exception. , Democrats vote for it and all Republicans vote against it.

A recent cap change from the previous 20,000 and $200 to $600 per transaction was part of the bill, which is expected to identify Americans who do not report the full extent of their gross income to the government.

Critics have called the bill part of the government’s overreach into Americans’ personal finances, noting that such excessive tax measures would hurt small business owners and average citizens trying to make ends meet. This contradicts the president’s statement that imposing more taxes will not affect low- and middle-income Americans.

A survey conducted by the 1099-K Fairness Coalition, formed by eBay, Etsy, Mercari, OfferUp, Poshmark, Reverb, and Tradesy, found that 86 percent of casual sellers made less than $5,000 in gross revenue in 2021. -7 percent of respondents said they were unaware of the new IRS reporting requirements.

The group said the guidelines would cause unnecessary confusion amid conflicting information, forcing many to consult expensive tax advisers. Even those who owe no taxes will be forced to report their income, and online marketplaces will be required to collect full social security numbers from small sellers.

Of the 40 percent who said the new mandates created economic hardship, 74 percent said they were selling online to cover necessary personal expenses. 69 percent of respondents said they would consider stopping online sales due to the new measures.

“There is a huge tax gap in the US, estimated at $7 [trillion] in terms of tax collections falling as short as we believe we owe them over the next 10 years,” he said Treasury Secretary Janel Yellen in an interview with CNBC last year. “It comes from places where income information is opaque and can be hidden.”

Regarding the collection of more personal financial information about taxpayers’ bank accounts, Yellen said, “It’s just a few pieces of information about individual bank accounts,” confirming that the IRS has the ability to conduct such inspections.

He added that the additional information would help the IRS target and conduct audits of “high net worth and wealthy individuals who may be hiding their transactions and income.”

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Naveen Athrappully is a news reporter covering business and world affairs at The Epoch Times.

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