POLK COUNTY, Fla. (WFLA) — People who use third-party payment platforms, including Venmo and PayPal, especially those who conduct business on it, may receive a 1099-K tax form from the IRS this year.
“I get paid cash, check, Venmo, cash app, PayPal, Zelle,” said Ashley McCary, explaining the diverse ways she receives payment from clients of her business, Ashley’s Ultra Cleaning.
She submits her taxable income from all those sources to her bookkeeper.
“I’m already doing exactly what the bookkeeper tells me and now I’m going to have a 1099 on top of that,” she said. “Hopefully my bookkeeper can help me figure out so I don’t have to pay twice.”
A double taxation is one reason some are concerned about a new tax reporting rule from the IRS.
“You will not get taxed twice,” said Michael Riskin, owner of CPS Investment Advisors in Lakeland.
Riskin assures business owners if they file their income as they always have, there will not be an issue.
This is not a new tax, although it can make it harder to underreport income from the payment processing platforms. The threshold at which companies, including Venmo, PayPal, Etsy, eBay and Cash App, have to issue 1099-K tax forms has lowered to $600 of income over the course of the year, from $20,000.
“Before, if it was below $20,000, you were still required to report that on your tax return as income. Now the only difference is, say you made $5,000 this year, you’ll be receiving a 1099-K to verify that,” said Riskin.
Some accountants are bracing for confusion.
“Can you imagine the nightmare that’s gonna happen? Even my company, we’re trying to figure out how are we gonna handle this,” said Tax Debt Consultants Carlos Samaniego.
Samaniego said it may be challenging for these companies to determine which transactions are business and which are personal.
“The tax system is set up that you’re guilty until proven innocent. As far as the IRS is concerned, when they get that 1099-K, that was income unless you can prove otherwise,” said Samaniego.
Riskin suggests getting a tax professional involved if there is a mixup.
“There might be some ways on the forms to let the IRS know that … this was an error. Doing it yourself might be a little tricky,” said Riskin.
The new rule does not apply to the app Zelle because it directly connects the bank accounts of the payer and receiver, according to CNN.