IRS Again Delays Reporting Requirement for Commercial Transactions involving Venmo and other Payment Apps by Savannah Cabrera Snow, CPA
For the second consecutive year, the IRS is postponing the implementation of a 2021 law requiring e-commerce companies and mobile payment platforms, such as Venmo, PayPal, Cash App and Square, to report certain business transactions to the IRS annually and issue to customers Forms 1099-K, Payment Card and Third-Party Network Transaction. Therefore, only taxpayers who completed more than 200 transactions or received commercial payments exceeding $20,000 in 2023 should expect to receive 1099-Ks before January 31, 2024. This changes for the 2024 tax filing season when the reporting requirement is set to apply to gross receipts of more than $5,000. This reduced reporting threshold means that a significantly greater number of taxpayers can expect to receive 1099-Ks in early 2025 when they file their 2024 tax returns.
According to the IRS, the reporting delay allows the agency more time to educate and prepare taxpayers to comply with the new law, which applies only to payments users receive for goods and services in the ordinary course of business. It does not levy any new tax or apply to individuals who use mobile payment apps for personal convenience. Instead, affected users include established businesses, independent contractors, gig economy workers and other individuals who earn taxable income from side gigs, such as renting out their homes on Airbnb and selling items on websites like Etsy, eBay, Ticketmaster and StubHub.
Specifically excluded from the reporting requirements are personal transactions in which users send or receive reimbursements from friends for a dinner, Uber ride or other shared purchase. Mobile fund transfers via Zelle, which settles transactions directly between users’ bank accounts, are also disregarded for reporting purposes. Finally, individuals who accept mobile payments when selling previously used items, such as clothing, furniture or technology, will also escape tax-reporting requirements unless they regularly engage in those sales for business purposes.
Taxpayers who accept mobile payments using these platforms must maintain meticulous records to verify their income against amounts reported on Form 1099-Ks in the future. Special care should also be taken to retain records of all business expenses, which they may use to offset additional income reportable on Forms 1099-K.
About the Author: Savannah Cabrera Snow, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she provides tax planning and consulting services to U.S. and multi-national businesses and their owners. She can be reached at the firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbcpa.com.
← Previous
