FIRM NEWS
FIRM NEWS
IRS Delays and Softens Its Proposed “Venmo Rule”

Earlier this year, we wrote a piece on the Internal Revenue Service’s delay of the so-called “Venmo rule,” which would require third-party payment platforms like Venmo, PayPal, and Cash App to report transactions exceeding $600 to the IRS. The rule has been controversial, and confusion over the rule resulted in the IRS delaying implementation earlier this year.

Late last month, the IRS announced a second delay in the implementation. Originally scheduled to go into effect for the 2023 tax year, the rule has now been pushed back to 2025. This means that individuals who receive payments through these platforms in 2023 or 2024 will not be subject to the new reporting requirement. Instead, the old rule will remain in effect and reporting (the issuance of a 1099K Form) is not required unless a taxpayer receives over $20,000.00 and has more than 200 transactions in either 2023 or 2024.

Furthermore, in announcing the delay, the IRS has also made substantive changes to the rule. In particular, the IRS acknowledged concerns raised by the public that, under a $600 threshold, the casual sale of personal items like clothing and furniture for a loss could generate a Form 1099K even if the seller has no tax liability from those sales. As a result, the IRS announced it plans to raise the proposed threshold from $600 to $5,000. The IRS continues to invite feedback on that figure as well as other elements of the reporting requirements.

So what does this mean for users? If you received payments through Venmo, PayPal, Cash App, or other similar platforms in 2023 or receive similar payments in 2024, you will not receive a 1099-K form for those transactions unless you exceed $20,000 over 200 transactions. However, you are still responsible for reporting any taxable income received through these platforms on your tax return, regardless of the amount.

As a friendly reminder, here are some things to keep in mind if you use payment apps like Venmo:

  • Make sure that you are reporting all of your income to the IRS. If you are earning income through payment apps, you should be reporting it on your tax return.
  • If you are a small business, be aware of the new reporting requirements. The IRS has said that it will not penalize businesses that make a good-faith effort to comply.
  • If you have been using a single payment app account to receive both taxable and non-taxable income and you think it might be difficult to keep a sufficient paper trail to show that non-taxable payments to you were in fact non-taxable, you should consider having separate payment app accounts: one for your taxable income, and a separate one for non-taxable (personal) payments.
  • The IRS has resources to help taxpayers understand the new rule and comply with it. If you have any questions about the new rule, visit the IRS website, https://www.irs.gov/businesses/understanding-your-form-1099-k.

Contact Kate Clark and Jess Waltman at (504) 582-1111 for assistance or with any questions. You may also reach them by email at kclark@gamb.com and gwaltman@gamb.com.

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