Keep in mind, the new reporting threshold does not change your basic tax responsibilities.
The ultimate aim of the provision is to clamp down on unreported, taxable income. 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. 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. A business transaction is defined as payment for a good or service. 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. If you’re among the millions of people who use payment apps like PayPal, Venmo, Square, and other third-party electronic payment networks, you could be affected by a tax reporting change that goes into effect in January.
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