Tax law changes could affect PayPal, Venmo, and Cash App users
SILVER SPRING, Md. - Millions of small business owners who rely on payment apps like Venmo, PayPal, and Cash App could be subject to a new tax law that just took effect in January.
Beginning this year, third-party payment processors will be required to report a user's business transactions to the IRS if they exceed $600 for the year. The payment apps were previously required to send users Form 1099-K if their gross income exceeded $20,000, or they had 200 separate transactions within a calendar year.
Although the change took effect in the new year, small businesses do not need to take it into consideration until the 2022 tax-filing season begins next year.
Download the FOX 5 DC News App for Local Breaking News and Weather
Ramakrishnan Ganesan, an accountant, tells FOX 5 DC the apps will keep track of the applicable transactions, and they’ll be the ones to send business owners the tax form.
![](https://images.foxtv.com/static.fox5dc.com/www.fox5dc.com/content/uploads/2022/03/932/524/GettyImages-1006311708-1.jpg?ve=1&tl=1)
"The app, they have all the transactions there," she said. "All they have to do is, at the end of the year, push a button and say how much money they received.
Yinka Ogunsunlade is a lawyer and E-Commerce business owner. His company, Fashionably Legal, is based in Silver Spring.
Ogunsunlade says there are a lot of sellers who fall in the range between $600 and $20,000, and they are not happy about this.
"We have small-time sellers and sellers who just do this as a hobby," he explained. "These are people who are not really using this as a business but just a way to make some extra cash, and right now they would be forced with this new law to file taxes as a profit-making business and keep track of their sales, and keep track of how much they purchase items for – things they wouldn’t ordinarily keep track of during this process."
New tax rule requires PayPal, Venmo, Cash App to report annual business payments exceeding $600
The new rule only applies to payments received for goods and services transactions, meaning that using Venmo or PayPal to send a loved one a gift, pay your roommate rent, or reimburse a friend for dinner will be excluded. Also excluded is anyone who receives money from selling a personal item at a loss; for example, if you purchased a couch for $300 and sold it for $250, the amount is not taxable.
"This doesn't include things like paying your family or friends back using PayPal or Venmo for dinner, gifts, shared trips," PayPal said in a November statement.
FOX News contributed to this report.