New IRS Policy Could Penalize Millions

New IRS Policy Could Penalize Millions

( – While small business owners should be keeping track of their income and expenses, there are certainly those who let accounting fall by the wayside. In the past, payment apps like PayPal and Venmo produced tax paperwork for people who sold over $20,000 of items and processed over 200 transactions. However, the American Rescue Plan changed all that, and now some people will be surprised when they start getting their 2022 tax documents.

When President Joe Biden signed the American Rescue Plan in March 2021, the threshold for third-party payment applications to report transactions moved from the previous $20,000 to a meager $600. So, sellers who list items on eBay or Etsy and get paid will get a 1099-K form from the sites detailing their earnings.

The goal of this legislation was to cut down on Americans evading taxes, but many people believe it is targeting small businesses in an overbearing move from the federal government. Some experts believe it could cut back on gig work and other so-called side hustles people often take up these days to make extra cash.

It is important to note that money exchanged on these apps not for goods and services, such as reimbursing a friend for a dinner they put on their card, would not appear on the 1099-K. But, when Americans go to file their taxes next spring, it is important the income they declare matches the 1099-K when they file.

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