New Tax Law for Payment Apps Users

Recent and, in some cases, ongoing restrictions related to COVID-19 have led to increased popularity in the use of mobile payment applications like Cash App, Venmo and PayPal.

Many small businesses now accept payments through these third-party applications, which has necessitated an update to corresponding IRS reporting requirements. The change, which became effective January 1, 2022, was included in the $1.9 trillion American Rescue Plan stimulus package signed into law in March 2021.

Before the new law was passed, the IRS only required the reporting of payments received through third-party providers for amounts of over $20,000 and if more than 200 transactions were completed during the tax year. Under the newly passed legislation, users who receive payments that total over $600 for goods and services through third-party payment networks will receive a Form 1099-K, Payment Card and Third-Party Network Transaction from those payment providers. 

Initially there were concerns that this requirement would also impact individuals who utilize the services for nontaxable payments they receive, such as for reimbursements from a friend or family member, or money received as a gift. Those types of payments will not receive Form 1099-K, but the payment applications may not be able to determine which transactions should be classified as business transactions or payments received for the provision of goods and services without input from the user. Many of these applications now include a toggle that allows the user to classify transactions appropriately. 

As we approach the end of tax year 2022, users who receive business payments through these applications should be sure to review and, if necessary, inquire with the provider of how to make proper indications of taxable transactions within the application to ensure proper reporting to the user on Form 1099-K. If you have any questions, contact your Schneider Downs tax advisor.

About Schneider Downs Tax Services

Schneider Downs’ tax advisors have experience and expertise in a wide range of industries, including Automotive, Construction, Real Estate, Manufacturing, Energy & Resources, Higher Education, Not-for-profits, Transportation and others. Our industry knowledge and focus ensure the delivery of technical tax strategies that can be implemented as practical business initiatives.  

To learn more, visit our dedicated Tax Services page. 

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2022 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
UPDATE: Inflation Reduction Act – Final Senate Version Eliminates the Change in Carried Interest Rules
Inflation Reduction Act – Tax Provisions Included in Proposed Legislation
Changes to R&D Expense Rules Affecting Manufacturers
Is your Venmo transaction reportable? - IRS intensifies 1099-K reporting requirements for Third-Party Network Transactions
New Tax Law for Payment Apps Users
Tax Impact BY Dan O'Toole
Will Potential Laws Change the Tax Implications of Cryptocurrency?
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×