IRS DIGITAL PAYMENT CRACKDOWN

IRS digital payment crackdown. With the Covid pandemic still causing economic problems, and the governments of the world needing additional money to combat the pandemic, alternate sources of revenue have been turned to, to fill in the gaps needed to rev up the economy, and pay for additional measures needed to combat the virus and its impact. Cryptocurrency is one of the sources of revenue, but also any other type of digital payment methods that are being used in the broader economy for payment for services and goods. Those have been under the radar for some time, but that time seems to coming to an end. IRS digital payment crackdown.

You might be using things like PayPal, Venmo for paying for different things, but the need to report those has been lacking, up to now. A tax reporting change is now in effect that ends the free ride for those payment methods and apps. Payment app providers will have to start reporting to the IRS a user's business transactions if, in aggregate they total $600 or more for the year in business transactions, as defined as payment for a good or service. Prior to this change, app providers only had to send the IRS a form 1099-K if an individual account had at least 200 business transactions in a year and if those transactions combined resulted in gross payments of at least $20,000 The expansion of the reporting rule is the result of a provision in the American Rescue Plan, which was signed into law earlier this year. The ultimate aim of the provision is to clamp down on unreported taxable income.

Each app provider must decide which procedures it will use to accommodate the rules and and if anything will be required of them to better identify the nature of the transactions. The net effect of the new reporting requirements for users of payment apps may be that some will ask customers to pay them in cash.