Urgent warning from the IRS for taxpayers using Venmo and PayPal – new limit on how much you can receive before paying a penalty

MILLIONS of users will have to get used to new tax limitations on third-party networks like Venmo and PayPal.

The IRS advises users on what they will need to do differently when filing taxes.

Users of third-party payment apps will have to report anything they earn over $600

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Users of third-party payment apps will have to report anything they earn over $600Credit: Getty

Alternative payment sites now have a $600 threshold for the amount you can receive before you start seeing tax penalties.

Prior to 2022, the federal reporting threshold only applied to taxpayers who had more than 200 transactions with a total value of more than $20,000.

Congress decimated that amount as part of the American Rescue Plan Act of 2021, so even a single transaction worth $600 will require users to file federal Form 1099-k.

The new limit is expected to raise $8.4 billion from fiscal year 2021 to 2031, according to the Joint Committee on Taxation.

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The change applies to all transactions, including part-time work, side businesses and anyone selling goods.

These popular apps have been around for years and provide an easy way to send money between friends or pay for goods and services.

Due to transactions between friends, some people may get the 1099-K by accident.

Personal transfers for things like sharing meals or gifts or paying allowances aren’t part of the new rule, but they can trigger the form to be accidentally submitted.

If you receive a form by accident, you should contact the issuing company for a correction.

Tax consequences of secondary stampedes

Despite these changes, the tax implications for side hustles are nothing new.

Many self-employed taxpayers must file a tax return and pay estimated tax each quarter.

“Unfortunately, having a side hustle, like self-employment and odd jobs, can lead to some tax complications,” Mark Stewart, CPA for Step By Step Business told The Sun.

“Most people forget that in addition to the taxes they pay on their main income, they also have to file and personally pay taxes on their stampede.”

Another tax expert, Kari Brummond, used the example of someone earning $500 a week as a driver or extra work through Upwork.

“At tax time, you’ll get a tax bill for at least $900 on that income,” the Taxcure preparer told The Sun.

“If you have to pay income tax, the tax bill on your six grand income could be $1,500 to $2,700 or more.”

Anyone who earns $400 or more from self-employment must report it to the IRS, according to the agency.

Self-employment applies to those who run a business for themselves, including part-time work.

In addition, individuals who run or associate with a trade or business are also affected.

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For more related stories, check out the key dates to watch for this tax season.

The Sun has compiled a list of the top 10 money-making side businesses for 2022.

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