Income Taxes

[44876]

What type of financial payments that are transferred by Venmo and PayPal are reportable and is there a W 2 type form issued to the person that receives the funds? 

[Bsch4477]

Beginning January 1, 2022, all third-party payment processors in the United States are required to report payments received for goods and services of more than $600 a year. This means if you’ve sold goods or conducted a business service and collected payment through Venmo, PayPal, Cash App, Square, Stripe, Etsy, or eBay, you will receive a 1099-K Payment Card and Third-Party Network Transactions Form, and that income will be reported to the Internal Revenue Service (IRS).

[JoanO]

How will the IRS know if a Vinmo payment is just someone paying back a loan? Will i be taxed on a loan repayment?

[44876]

Does this apply to a bank account where checks would be deposited versus electronic fund transfers through PayPal, Vemon, Zeile and etc?

Would a bank give the IRS the same type of form if only checks were deposited into a personal account? 

[Bsch4477]

The law started this year so what and how payments are reported remains to be seen. 

The bottom line for tax payers is to keep good records and report any taxable income. 

[TomD8]

The new instructions for Form 1099-K may answer some of your questions:

https://www.irs.gov/pub/irs-pdf/i1099k.pdf

[JamesEmory]

PayPal just notified me of this change on 9/21/2022.  Why did they wait that long to inform me is questionable irresponsibility toward their customers.  So now I have to pay a ton of taxes because the new law is not 200 or more invoices and 20K or more in income before a 1099K is issued.  Shame on PayPal.  Had I known in January when they knew, I could have put money away toward taxes.  Shame on PayPal.

[JamesEmory]

So if I receive 600.00 for sales into PayPal and transfer that 600.00 to my checking account, am I going to be taxed for 600.00 twice?

[Bsch4477]

No. You only pay tax on your business income reflected on your K-1.  

[JamesEmory]

Thanks Champ.  The way I read, it was all incoming money exceeding 600.00 per year to any banking institution will be reported to the IRS.  So your answer is a relief somewhat.  

[Bsch4477]

The key is that while income will be reported, the taxpayer is only responsible for reporting business income. If there is a combination reported we will get guidance on how to separate the business portion on your return. 

[JamesEmory]

Well to be honest with you, I really do not own a business as such.  I find people interested in buying a company's products and then send the company the buyers name.  In return I get cash gifts for each contact.  This is why I would like to know if cash gifts are reportable.  As you can see on all my invoices, there is no product mentioned at all, nothing was sold by me.

[Bsch4477]

The income is reportable. It is not a gift since the giver got something in return. If the payments and the time spent on that activity are trivial in amount compared to your other income you might be able to make an argument for it being “other income “ to avoid self employment tax.