Apple Pay, Venmo, and Cash App Must Now Be Reported to the IRS
Weber Gallagher’s Family Law Group often reviews payments made through popular mobile apps, including Venmo and Apple pay, in discovery and for support purposes. Clients who utilize one of the many mobile payment platforms available to pay for services and goods assist attorneys in keeping accurate and timely records of such payments. For instance, the babysitter is ready to leave after a long night, a client can send money to the sitter instantly via Venmo. Or maybe a client wants to buy something on Etsy for one of the kids. The buyer can go on Apple pay and, voila, the seller has the money, and the buyer has a gift. Well, the Internal Revenue Service (IRS) now wants to get in on the action. Beginning January 1, 2022, all mobile payment apps, including Venmo, PayPal, and Cash App, must report annual commercial transactions of $600 or more to the IRS.
The change to the tax code was part of the American Rescue Plan Act passed in March and will have a drastic impact on how people do business. This was a dramatic change from when the IRS taxed mobile payment apps only if there were 200 commercial transactions per year and the amount exceeded $20,000 in total value. Now, all babysitting payments and other services or purchases for commercial goods which meet the threshold will require mobile apps like Venmo to file and furnish a Form 1099-K. The new IRS rule will also apply to online craft businesses or purchases made on eBay. However, it will not apply to personal charges to friends and family for splitting a dinner bill. Interestingly, Zelle’s payments are not subjected to the 1099-K requirement because Zelle is between financial institutions and does not hold accounts or handle the settlement of funds. It is important to be aware of calculated payments on these apps in determining whether the transactions will be taxable.