The American Rescue Plan (2021) lowered threshold of reporting via information return (a 1099-K) of payment transactions from $20,000 or 200 transactions to $600. However, several times the IRS has delayed the rollout of this requirement.  In November 2023 IRS pushed the requirement to tax year 2024.

Congress is currently (Dec 2023) considering amended the law to increase the threshold to $5,000 or $10,000. 

Either way, a change is coming. You should be prepared.

If you are selling goods or services but you haven’t exceeded the reporting threshold yet and have not reported the net income to the IRS, now is the time to start coming clean. Track your sales and collect out of pocket expenses and report the results on a Schedule C of your Federal Tax Return.

Determine for sure that your activity is a trade or business and not a hobby. The IRS has a 9-question quiz to determine if an activity is a hobby or business. Important you review those 9 questions to see if your activity is a hobby or business here: https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

If you are mixing business and personal transactions on your Venmo or CashApp. Stop. Create a business Venmo account. Keep the transactions separate. Trying to reconcile businesss and personal transactions for the Tax Return could be very difficult and tedious.

For your personal transactions, if app presents check box indicating transaction was not a sale of good services be sure you check it when transferring funds to friends or family.

Be prepared for the lower reporting thresholds. Most likely, the various cash apps will make mistakes once they must issue these 1099-K’s. Review the reporting capabilities of the app.

If the app reports non-business income on the 1099-K, there is a procedure to report it without it being taxed on the tax return. Use this procedure versus seeking a corrected 1099-K as outfits like Venmo will be probably unable to respond to a Tsunami of problems when the reporting thresholds are lowered.

Report the Income on Schedule 1, Part I, line 8z. Report it also on Schedule 1, Part II, Line 24z which effectively nets the amount to zero.

If you have a side gig and need an assist reporting it, click the Contact me on this website and our team can assist.