Tax Update: IRS Delays $600 Reporting Threshold for Venmo, PayPal and Third-Party Payment Apps

[finance.yahoo.com]

This was a bad idea from the start. Biden said he would not raise taxes on anyone making less then $400,000 and than turns around and taxes anyone making $600 on pay apps. I HATE politicians.

@johnb974 wrote:

This was a bad idea from the start. Biden said he would not raise taxes on anyone making less then $400,000 and than turns around and taxes anyone making $600 on pay apps. .

That has always been taxable income, the new law was just to require those companies to report it to the IRS

Edited 1 time(s). Last edit at 06/12/2023 01:45AM by Tvolgirl.

The law was any income over $20,000 by PayPal had to be reported. Biden changed that to anything over $600. Even if you sold things in a garage sale. Any payments you received on PayPal would be reported. It would require people selling items in a garage sale to report the income. I do many restaurant shops and get reimbursed for my meals. Pay Apps do not separate pay from reimbursements. I would have to prove everything and just hope the IRS accepts it.

Edited 1 time(s). Last edit at 06/12/2023 02:17AM by johnb974.

There was no change by Biden to taxes on self-employment income unless you were hiding income under the $600 reporting threshold. You have to report and pay tax on all secret shopping income.

"I do many restaurant shops and get reimbursed for my meals. Pay Apps do not separate pay from reimbursements. I would have to prove everything and just hope the IRS accepts it."

You should already be keeping track of expenses and reporting them appropriately. I've never had an issue with reporting secrest shopping expenses/mileage.

Edited 1 time(s). Last edit at 06/12/2023 02:22AM by boridi.

If you get an audit you would have to prove it and just HOPE the IRS accepts your records. I don't see Binden, Hunter and major corporations reporting all of their income....but they demand you do. Many parents charge their adult children rent. Do you really think they report it as income?

Edited 1 time(s). Last edit at 06/12/2023 02:32AM by johnb974.

This all came up in April as well. You, we, anyone, everyone all need to report all earned income regardless of whether or not those paying you report it. That’s all there is to it.

It being reported to the government has no bearing on the fact that you owe taxes on it.

This hurts people who struggle to get by and try to make money on the side. It also forces those who have little, to hire a tax accountant or CPA. This also overloads the IRS. This was a bad change from the start. it hurts individuals and small businesses.

$600 has always been the threshold for non-employment earnings. This is why all of the MSCs send 1099s for anything you are paid over $600.

Looks to me like you're grasping at straws to blame President Biden for something. I'm sure there are plenty of things he's done, but so far none have hurt my pocketbook. And if I lived anywhere except Alabama I would probably be seeing some results from the infrastructure bill.

@Morledzep wrote:

$600 has always been the threshold for non-employment earnings. This is why all of the MSCs send 1099s for anything you are paid over $600.

Looks to me like you're grasping at straws to blame President Biden for something. I'm sure there are plenty of things he's done, but so far none have hurt my pocketbook. And if I lived anywhere except Alabama I would probably be seeing some results from the infrastructure bill.

For example, think about a group of friends who regularly has lunch or dinner together and one person pays the bill. After the meal, the friends send reimbursement through Venmo. Unless the account or payment is designated as personal, it will trigger a reporting requirement if the annual amount exceeds $600. The person receiving the funds could receive a Form 1099-K, and the IRS will expect to see that income reported on his or her tax return. Payments incorrectly classified as business (goods or services) will trigger a Form 1099-K. If a taxpayer believes it is not taxable and does not include the amount on his or her tax return, it will create a mismatch with IRS systems potentially triggering an IRS notice of adjustments and penalties. If not taxable, taxpayers will be required to provide support as to why the payments should not be included in income. Lowering the threshold from $20,000 to $600 substantially increases the number of Forms 1099-K that will be issued.....Biden changed the reporting threshold for pay apps. He created a mess.

@johnb974 wrote:

Tax Update: IRS Delays $600 Reporting Threshold for Venmo, PayPal and Third-Party Payment Apps

[finance.yahoo.com]

This was a bad idea from the start. Biden said he would not raise taxes on anyone making less then $400,000 and than turns around and taxes anyone making $600 on pay apps. I HATE politicians.

The assertion that new payee reporting requirements is a tax increase is absurd. Its just a mechanism to allow the patriotic Americans at the IRS to go after those who are not honest enough to pay their taxes.

If you haven't been paying tax on income which you earned but for which you have not received a 1099, then you should immediately file form 1040-X, for each relevant year, to amend you tax return and pay taxes which are past due on that income.

@johnb974 wrote:

The law was any income over $20,000 by PayPal had to be reported. Biden changed that to anything over $600. Even if you sold things in a garage sale. Any payments you received on PayPal would be reported. It would require people selling items in a garage sale to report the income. I do many restaurant shops and get reimbursed for my meals. Pay Apps do not separate pay from reimbursements. I would have to prove everything and just hope the IRS accepts it.

Sorry, the change was an act of Congress. The President does not have authority to create tax law.

Not all payments made on PayPal are (or will be) reported by PayPal. Only those payments for goods and services, not for payments between friends.

You should already be maintaining detailed records of both your income and reimbursements. Remember, reimbursements in excess of the minimum meal that one is required to purchase in order to complete the shop are taxable.

The IRS is well known to accept records which are reasonably kept by taxpayers.

Edited 1 time(s). Last edit at 06/12/2023 07:05AM by Rousseau.

@johnb974 wrote:

This hurts people who struggle to get by and try to make money on the side. It also forces those who have little, to hire a tax accountant or CPA. This also overloads the IRS. This was a bad change from the start. it hurts individuals and small businesses.

Nope. The new regulations do not hurt any person struggling to get by. They only affect major payers such as PayPal. The only impact on the individual will be a few more lines to complete on one's 1040 -- hardly something to be upset about and hardly enough to require a professional tax preparer.

@Rousseau wrote:

@johnb974 wrote:

The law was any income over $20,000 by PayPal had to be reported. Biden changed that to anything over $600. Even if you sold things in a garage sale. Any payments you received on PayPal would be reported. It would require people selling items in a garage sale to report the income. I do many restaurant shops and get reimbursed for my meals. Pay Apps do not separate pay from reimbursements. I would have to prove everything and just hope the IRS accepts it.

Sorry, the change was an act of Congress. The President does not have authority to create tax law.

Not all payments made on PayPal are (or will be) reported by PayPal. Only those payments for goods and services, not for payments between friends.

You should already be maintaining detailed records of both your income and reimbursements. Remember, reimbursements in excess of the minimum meal that one is required to purchase in order to complete the shop are taxable.

The IRS is well known to accept records which are reasonably kept by taxpayers.

The problem is many people who get payments on PayPal may have not known about the difference between sending money as goods and services and sending money as family and friends. The change in the law was from Bidens "Inflation reduction act" BOTH parties are working on changing this.

Do a Google search on how this will affect garage sales and people working to just get by. See how it hurts individuals and small businesses. Take some time to read up on this.

I am pretty sure people who want to cheat on their taxes will quickly find a way to continue to cheat. If someone has been reporting income as the tax law dictates this is not a change at all. As for your example, even if they go to dinner with some friends it seems to me if the bill is over $600 they are probably not low income and struggling due to income but rather due to expenses. I am not saying you, John, are doing this.
It's main aim is to close loopholes that many use, both rich and poor, to avoid paying taxes. Those people who avoid paying taxes that are due by them hurt all of us. The best defense is to learn the tax rules for your situation and if you use an accountant make sure you are giving the accountant all the information. Withholding info from the accountant may get an error in your tax form and audit thrown at you although audits are unlikely. As they say in statistics "Garbage in, Garbage out." when it comes to taxes. Many organizations will do your taxes for free if you are low income.

@sandyf wrote:

I am pretty sure people who want to cheat on their taxes will quickly find a way to continue to cheat. If someone has been reporting income as the tax law dictates this is not a change at all. As for your example, even if they go to dinner with some friends it seems to me if the bill is over $600 they are probably not low income and struggling due to income but rather due to expenses. I am not saying you, John, are doing this.
It's main aim is to close loopholes that many use, both rich and poor, to avoid paying taxes. Those people who avoid paying taxes that are due by them hurt all of us. The best defense is to learn the tax rules for your situation and if you use an accountant make sure you are giving the accountant all the information. Withholding info from the accountant may get an error in your tax form and audit thrown at you although audits are unlikely. As they say in statistics "Garbage in, Garbage out." when it comes to taxes. Many organizations will do your taxes for free if you are low income.

The $600 is for the total over the year. Not a one time dinner. I had a friend send me several thousand as a gift. Unfortunately they sent it on PayPal as a business. How many people have had money as gift sent that will show up as a business expense. At least I kept records of all the e-mail exchanges. This is going to create a mess for the pay app sites and the IRS. Many people who have very little skill with filing a schedule C will now be forced to. This is a blante tax on the poor and middle class. The IRS can demand you pay the taxes now and they will figure it out later. If the ever do. Have you ever tried calling the IRS for help on your taxes?

"Many organizations will do your taxes for free if you are low income."....not if you have to file a Schedule C. I have looked into this. They will only do simple filings. If it wasn't for me doing mystery shopping, I wouldn't even have to file taxes. My only other income is Social Security.

Last year and the year before I got my taxes in very late as my regular tax guy disappeared for months on end during the pandemic. I had no way of contacting him to see if he was even still alive. I did my own taxes using turbo tax. While I will be using the more expensive home and business this year with a schedule C last year I did not use schedule C but was able to just report my earnings, less reimbursements and mileage on the regular 1040. I have good records and have not done enough work for any one company to get a 1099. I ignore what paypal sends as it is not correct. So far it has been 2 years since 2020 and I have not heard a peep from the IRS but if they do contact me I can show them my records.
I have occasionally had a "phone" audit which was just about one line on my taxes and after a brief explanation the case was closed. Full audits are very rare unless something looks very out of wack. Stay away from a three or four day trip of 300 miles to a resort area where you do one mystery shop a day and charge for reimbursements on all your mileage from home, meals and hotel against expenses and you will be okay.
As a senior with only social security and mystery shopping your tax form will be pretty easy. AARP sponsors classes on filling in tax forms sometimes. Maybe you can take one of those.

@johnb974 wrote:

"Many organizations will do your taxes for free if you are low income."....not if you have to file a Schedule C. I have looked into this. They will only do simple filings. If it wasn't for me doing mystery shopping, I wouldn't even have to file taxes. My only other income is Social Security.

My daughter n law wants to sell some of her sons' nearly new clothing and shoes on EBay. As payment is by paypal and as she does not keep every receipt for every outfit she buys for the 2 boys she does not have the cost basis which would be required if ever questioned. Ebay takes fees and there are postage charges so if something sells for $10 plus $6 postage for a total of $16- that is the amount paypal reports. However there are ebay fees and postage fees taken out so that the net is not $16 and if you cannot prove the cost basis of what you sell, the IRS assumes zero as the cost basis and you are hit for the total amount. This has kept her from selling a lot of clothing that is virtually brand new but too small for the boys. The $600 rule was stupid. She is by no means a tax cheat and only wants to sell things she does to buy new things for her boys. The $600 rule being changed is good news as she can now start selling and not worry about finding receipts for things she bought 2 or 3 years ago for the kids.

@SueW70 wrote:

My daughter n law wants to sell some of her sons' nearly new clothing and shoes on EBay. As payment is by paypal and as she does not keep every receipt for every outfit she buys for the 2 boys she does not have the cost basis which would be required if ever questioned. Ebay takes fees and there are postage charges so if something sells for $10 plus $6 postage for a total of $16- that is the amount paypal reports. However there are ebay fees and postage fees taken out so that the net is not $16 and if you cannot prove the cost basis of what you sell, the IRS assumes zero as the cost basis and you are hit for the total amount. This has kept her from selling a lot of clothing that is virtually brand new but too small for the boys. The $600 rule was stupid. She is by no means a tax cheat and only wants to sell things she does to buy new things for her boys. The $600 rule being changed is good news as she can now start selling and not worry about finding receipts for things she bought 2 or 3 years ago for the kids.

Not only will she pay more in federal taxes as income, because she would have to file a Schedule C form, she'll have to pay more in Social Security and Medicare taxes.

I do not sell on Ebay but many mystery shoppers have reported that they do. Perhaps you should start a thread on the General Chat about this as it is not mystery shopping and others may chime in on the best way to handle Ebay sales. I would think if selling used clothing you actually bought new there is no profit at all unless it is highly treasured vintage stuff. Ebay must have a section of their website where they can tell you fees you paid monthly or quarterly or annually. Your daughter in law already probably has photos and descriptions from her ads on Ebay so that part of book keeping is already done.

I am going to play devil's advocate. Maybe your friend sent you thousands of dollars from a business account since they plan on deducting it as a business expense. You will never know unless you have access to their income tax returns.

@johnb974 wrote:

I had a friend send me several thousand as a gift. Unfortunately they sent it on PayPal as a business. How many people have had money as gift sent that will show up as a business expense.

Actually the IRS will ask for receipts from what I have read. It is nearly impossible to keep receipts for everything. If you have no receipt just as the law is for stock sales they consider the cost basis to be zero and the full amount of the sale is reportable as taxable income. I have a friend who was selling her old Coach and other designer bags on ebay. She obviously paid a lot more than she was selling them for but she did not keep receipts- she stopped selling once this $600 1099K thing went into effect as her accountant told her if she did not have the receipts for the bags if the IRS questioned her she would taxed on the full sale price as the cost basis would be zero. Seems the IRS consider you guilty and you have to prove otherwise so they assume zero cost basis which was obviously not correct. She wound up selling the bags locally for cash and taking others to a resale shop which paid her cash no questions asked. And she did not report anything as she was selling personal items for less than she paid for them so no gain to report.

@SueW70 wrote:

Actually the IRS will ask for receipts from what I have read. It is nearly impossible to keep receipts for everything. If you have no receipt just as the law is for stock sales they consider the cost basis to be zero and the full amount of the sale is reportable as taxable income. I have a friend who was selling her old Coach and other designer bags on ebay. She obviously paid a lot more than she was selling them for but she did not keep receipts- she stopped selling once this $600 1099K thing went into effect as her accountant told her if she did not have the receipts for the bags if the IRS questioned her she would taxed on the full sale price as the cost basis would be zero. Seems the IRS consider you guilty and you have to prove otherwise so they assume zero cost basis which was obviously not correct. She wound up selling the bags locally for cash and taking others to a resale shop which paid her cash no questions asked. And she did not report anything as she was selling personal items for less than she paid for them so no gain to report.

People will just go to cash. I pay most tips in cash.

@myst4au wrote:

I am going to play devil's advocate. Maybe your friend sent you thousands of dollars from a business account since they plan on deducting it as a business expense. You will never know unless you have access to their income tax returns.

@johnb974 wrote:

I had a friend send me several thousand as a gift. Unfortunately they sent it on PayPal as a business. How many people have had money as gift sent that will show up as a business expense.

It was a gift, nothing to do with business. I did not sell them anything, they did not receive anything from me or anyone I know.

John, if you do get audited you can probably get a note from your friend who sent the money to you indicating it was a gift and sent mistakenly, or perhaps paypal can change the way it was recorded. From your friend's end as long as it was under the allowed amt of a non estate taxed gift (I think $16,000 this year?) that will get them off the hook with no tax consequences. If they leave it as a business expense and they actually have a business it could present issues on their tax return as well.

They have no business and my only business is mystery shopping. I do have the e-mails they sent me about the money. The issue I see, if they send me a notice of a tax bill, they can say I have to pay while they figure it out. You're guilty until proven innocent.

I have never been guilty until proven innocent with taxes and I have been paying taxes for many a year. I have also gotten notices with questions and always have had a chance to explain myself before sending in additional money and my explanation has always been accepted. Something like the issue you describe below seems to be pretty straightforward. I think many people using paypal click on the wrong button. I know I once did!

They have no business and my only business is mystery shopping. I do have the e-mails they sent me about the money. The issue I see, if they send me a notice of a tax bill, they can say I have to pay while they figure it out. You're guilty until proven innocent.[/quote]