Tax Update January 2022

Not only did January 1 mark the beginning of 2022, but New Year’s Day also presents additional significance. The March 2021 American Rescue Plan imposes new reporting requirements for small businesses that receive payments for goods and services via third-party payment processors. The payment application platforms include Cash App., PayPal and Venmo.

The third-party payment processors must now report transactions exceeding $600.00 in one year on IRS Form 1099-K. Prior law mandated that these companies provide users Form 1099-K if their gross income exceeded $20,000.00 or if the users had more than 200 transactions per year. Although the IRS has always mandated self-reporting, but many businesses neglected to keep record of smaller transactions. The new tax rule does not apply personal transactions such as reimbursing a friend or selling a personal item at a loss. This rule is separate from another proposal that would require banks and other financial institutions to disclose accounts with $10,000.00 of annual deposits or outflows to the IRS.