WASHINGTON, D.C. (KERO) — The IRS has designed new ways of taxing cash app transactions, but misconceptions might be leaving some confused about who these changes apply to.
Starting this year, businesses and individuals accepting payments through cash apps like Venmo, PayPal, Cash App, and Zelle will now have to keep an eye out for 1099-K forms. That's because the IRS will be keeping a watchful eye on cash app transactions for small businesses.
As part of the American Rescue Plan Act, cash apps will now report commercial income over $600. Previously, those business transactions were only reported if they were more than $20,000 at the end of the year.
Cash app users need to know this new rule only applies to business transactions. Those using apps to send money for personal reasons, to purchase items, or pay bills will not be affected. However, individuals selling products on apps or websites like Etsy or eBay might now have to report these transactions on their taxes.
For small businesses that do rely on cash apps, financial advisors are recommending differing between which apps are used for business transactions and which are used for personal use.
Cash app users might also expect now to clarify the nature of transactions made and received. And no matter how small the business or service might be, it’s a good idea to report all income to the IRS. If the total remains fairly low, reports say it’s unlikely you’ll owe taxes on it.