Paypal Changes for 2022

Relax, you will simply certify that you paid $5,000, that you didnt save the receipt and that you didnt know years ago that you would need it. This isn’t the Spanish Inquisition. Much ado about nothing…unless someone has been running a side business without paying income taxes. Nothing will collapse, the earth will still spin and the sun will rise. I don’t have a great deal of heartburn about a system attempting to encourage compliance. Im a “everyone should follow the rules and if they dont they should pay the consequences” kind of person.

See the attached Everyone calm down.

This is an excerpt from the CNBC Make It newsletter. Subscribe here.

A few days ago, I received a text from an acquaintance asking why the IRS was starting to track individual users’ Venmo transactions. As someone fairly tuned into the financial world, I was confused that I had heard nothing about this.

Searches on Google and Twitter quickly yielded a flurry of panicked and angry responses to a change in tax law put into effect by the American Rescue Plan last year that lowers the reporting threshold for business transactions on mobile payment apps. But users were largely mistaken to believe the change applied to them. The IRS is not requiring individuals to report or pay taxes on individual Venmo, Cash App, PayPal or Zelle transactions over $600. 

Rather, small business owners, independent contractors and those with a side hustle who use third-party payment apps for commercial payments will have their total transaction value over that threshold reported to the agency by the apps. Previously, it was $20,000 and 200 transactions. This also applies to those who run an eBay shop, for example, or any other online store that accepts payment cards, according to the IRS.

“There’s been a lot of misunderstanding about the tax reporting changes,” says Garrett Watson, senior policy analyst at the Tax Foundation. “It doesn’t change anything about if any transactions are taxed or not.” In other words, the IRS is not starting to tax individual transactions between family and friends. 

Splitting dinner with your friend, sending your roommate money for rent or gifting your cousin a round of birthday drinks? Don’t sweat it. “It’s not taxable,” Watson says.

That has been miscommunicated to many people, who seem to believe the IRS will be tracking every user’s account. Ambiguous headlines could be partly to blame. But the agency will receive aggregate transaction amounts from the payments apps about commercial transactions, Watson says, not information on specific payments.

Small business owners, those with a side hustle and others who receive commercial payments for goods or services through the apps will receive a 1099-K form from the payment apps, which will give the IRS more information about the business transactions being made on the platforms that often go unreported, Watson says. The change took effect Jan. 1, 2022, so filers don’t need to worry about it this tax filing season.

If your transaction is flagged by the IRS, Watson says you may receive correspondence from the agency that you can clear up with a receipt, bank statement or explanation. The only time you might really need to worry about being audited, he says, is if you move an “unusual” amount of money on the platform. But that’s always been the case.

“If we’re talking about a significant figure, into the five or six figures, of course you would want documentation,” he says. “But normal folks using it day to day, I wouldn’t worry about it too much. It shouldn’t dissuade you from using [the apps].”

It kills me that the guys screaming about the deficit are the same guys who think they shouldn't pay taxes.

Press button on fire extinguisher, point at hair on fire, continue doing so until no more fire, keep fire extinguisher conveniently located as hair tends to spontaneously combust from time to time.

Someone needs to post that fire extinguisher at dadork. 
Sounds like his hair has been burning for some time now.

All the best,
Nonoise