As a part of tax changes resulting from the American Rescue Plan, millions of Americans who use payment transfer apps like Venmo could be subject to new taxes.
Key Details
- Frequent users of apps like Paypal and Venmo could be facing a more complicated tax season than in previous years.
- Any user who has been paid more than $600 through a payment transfer app for goods or services might receive a 1099-K tax form.
- Not only will this be another headache for American taxpayers, but some experts are warning that the flood of new tax filings could overwhelm IRS staff.
- The complex regulations around the form leave others worrying that it could cause unneeded stress and work for taxpayers.
Why it’s news
Before the American Rescue Plan changed tax laws, only users who were paid $20,000 through 200 transactions received a 1099-K. This regulation would have affected small businesses or freelancers. Now, weekend babysitters or casual Etsy sellers could have to fill out a form.
The updated rules shouldn’t affect everyone—those who pay friends back for things like dinner or concert tickets should not receive a form—but there is a chance these forms will be sent accidentally.
If a person thinks he has received a form in error, he should first contact the company that sent the 1099-K. If the company is unable to assist, he will need to explain the discrepancy in a note on top of the 1040 form, Axios reports.
These changes are a part of the IRS’ attempts to reduce the amount of money owed in taxes that are never paid. However, the adjustments are such a dramatic change that some question whether they should be implemented this year.
Many consider it a new and unnecessary burden for individuals and small businesses.
“There’s a growing feeling that both the Internal Revenue Service and the private sector need more time to prepare,” writes Accounting Today’s senior editor Roger Russell, who argues for a delay in the form’s release.
