Cash apps are rapidly gaining in popularity, and the Federal government is implementing new tax laws to govern these transactions. Whether you’re a small business owner or a personal user, it’s important to know these new rules. Keeping careful records is essential to avoid IRS penalties and interest.
According to the new tax proposal, cash apps must report any payments that exceed $600 to the IRS. Once you reach this threshold, cash apps must send Form 1099-K to you. That means you must file a tax return for the money you earn. This applies to individuals, partnerships, LLCs, and corporations. Cash app networks such as Zelle are resisting these new regulations. They argue that the law doesn’t apply to them.
In January, the IRS implemented a new tax reporting rule for payment apps. Now, payment apps must report any business transactions over $600, excluding those involving gifts or property sold at a loss. However, this rule won’t impact small businesses until 2022 tax season. But it does create more complicated reporting requirements.
Fortunately, there is an easy solution. The new legislation requires cash apps to report any payments that exceed $600 to the IRS. This legislation will make it more difficult for third-party payment platforms to avoid reporting transactions to the IRS.