10/10/2023
How to avoid issues from payment apps like Venmo and CashApp for 2023 tax reporting requirements
Taxpayers who use peer-to-peer payment apps such as Venmo and PayPal and e-commerce companies such as eBay, Etsy and Poshmark may be receiving a tax form new to them next year — one that’s worth some advance planning.
Starting this tax year, such companies must use a new, lower threshold when issuing tax forms to individuals who make business transactions through those platforms. The tax-year 2023 threshold is just $600 for even a single transfer, down from more than 200 transactions worth an aggregate above $20,000.
As a result of the change, more taxpayers are likely to receive Form 1099-K, which reports third-party business payments to the IRS. The IRS delayed the controversial change, which was initially meant to go into effect for 2022 taxes. Some lawmakers are pushing to increase the reporting threshold, so it could change further.
However, regardless of the tax reporting threshold, it’s important to remember P2P business payments have always been taxable, experts say. Here are some additional tips to consider before the reporting change in January.
Personal P2P payments between friends and family still won’t be taxable, according to the IRS.
If you’re accepting business payments via P2P apps, it’s critical to put a bookkeeping or accounting system into place as soon as possible, and it’s best to separate business from personal payments, said Jim Guarino.
Markowitz urges families to keep an Excel file detailing income received and possible business expenses, with receipts, which may be deducted to reduce taxes. “Accounting does not have to be difficult, especially when you’re talking about something as small as the summer job your kid is going to do for eight weeks,” he added.
Source: https://hubs.li/Q01R_Xgm0
