Paying PT employee via payment app

[CC369]

Is it legit or recommended to use a payment app for payroll for a PT employee? W2 and employment taxes are dealt with via Quickbooks. Also, the amounts are slightly over $600, so will that create tax issues under the American Rescue Plan? Currently paying via check or Bill Pay, however the bank offers (and encourages) Zelle.

[Critter-3]

If you have an EMPLOYEE then you need to compute the paycheck correctly and withhold the appropriate taxes and file the required payroll tax returns  EVEN IF  you simply write them a check for the net pay after withholdings.  A print out of the calculations (and the YTD totals) should also be made available to the employee even if only by email.  Quickbooks has an employee payroll section that works very well. The option to use a separate payroll company is up to you.  

[CC369]

Yes. QB is used to deal with the payroll taxes, filing, etc. The pay stub is emailed to the (now) PT, remote employee. Paying the employee is ineligible via QB, hence have been mailing checks. The bank has been offering-defaulting to Zelle as a way to send funds. As convenient-timely Zelle would be, obvious questions-concerns come to mind. While waiting a response from Zelle, have been researching what others have to say on the matter. Zelle may not be an option, and seeing the field of payment apps for employers are growing perhaps that is worth looking into. Any recommendations? Thank you for your response. 

[Critter-3]

Zelle would be the same thing as setting up a direct deposit to the employee which is what has been done up to now ... you should be able to set up direct payment thru your bank if mailing a paper check is not convenient.  

[CC369]

That's encouraging. And yes, the bank does offer a direct deposit service however the monthly and transaction fees pushed the direction of researching other options. Zelle is a free service so hard to compete with that (!); it was just verifying if it was a legal to use as a payroll payment method. The many conflicting opinions was making the decision confusing. Thanks again for your input. Still curious to hear what Zelle has to say. They have yet to respond.

[CC369 · Accepted solution]

Just to close out this enquiry. 2024 research shows a clarified definition of third party payment apps like Venmo, PayPal, etc.

Zelle is NOT a third party payment app rather it is a service that performs direct bank transfers; therefore, Zelle is exempt from the new 1099-K reporting.

This of course does not exempt reporting one's income; however in this case, it resolves this initial enquiry as the performance of reporting/paying income tax is via QB and transferring (net) income from employer (bank) to employee (bank) is via Zelle.