Date: December 16, 2022
Don’t forget this important reporting update to your 2022 taxes!
If you are among the many business owners that receive (or send) payments electronically using third party payment apps (like Paypal, Venmo, Cashapp, Zelle,etc.) your tax reporting requirements are changing. The IRS requires you to report ”all worldwide income”. This applies to electronic transactions as well. So if you are transferring money to a friend to split a restaurant bill for example, then make sure you are using the proper setup and account. The third-party apps will all be reporting to the IRS now, regardless of whether you have a personal or a business account.
Prior to this update, the IRS required reporting of payments totaling $20,000 or more, and if you had 200 transactions or more. The new $600 rule is a result of the American Rescue Plan Act. So, any transactions made after March 11, 2021, that exceeds $600 must be reported to the IRS (that’s right, any transaction, regardless of how many transactions you have had).
Per the IRS, you should receive a 1099-K from each third-party payment app that you have received transactions through. This means yet another form that you will need to file on your 2022 tax returns. If you receive the form for personal transactions, then you will need to contact the payment platform to let them know it was sent in error and request a ‘corrected’ form be sent out immediately.
Most business owners despise doing taxes because it is time-consuming, confusing, and needlessly complex. To make matters worse if you make a mistake, you could incur fines, penalties and even trigger an audit. It’s important to have a professional in your corner to make sure things don’t fall through the cracks. We are passionate about making sure our clients are organized and set up for success.
It’s a smart investment to have someone in your corner looking out for you and making sure that everything is accurate and timely. If you are looking for a professional, or need guidance with your 2022 taxes, please contact us here, we are happy to help you!