The IRS wants a piece of your Venmo balance
The Future. The IRS is cracking down on payments from platforms such as Venmo, eBay, and Etsy by lowering the threshold for tax reporting to a measly $600. While the move was expected (money is money, after all), the change may put pressure on the platforms to create an easier user experience for those who go back and forth between business and personal payments on a given service.
Bill split surcharge
According to Bloomberg, prepare for a bigger tax bill next year if you have a habit of picking up the tab at dinner and just telling everyone to Venmo you.
- The IRS rolled out a rule this year that any user of Venmo, PayPal, eBay, Airbnb, etc., with gross earnings of over $600 on the platform, must be reported to the agency for tax purposes.
- Those users will be sent a 1099-K from each service where their earnings exceeded that limit.
The $600 threshold is a steep decline from the $20,000 limit the IRS previously held for users on these platforms. But the new limit may hit micro-business owners — the people who sell clothes on eBay or surplus vegetables from their garden and get paid via Venmo — the hardest. They’ll have to put in the extra work of labeling what transactions are business income and which are personal transactions… if users are even able to pay via their preferred payment platform.
Of course, the platforms are no fan of the rule, claiming that it forces them to collect millions of tax ID numbers and track down “non-compliant customers.” Several platforms, including eBay and Etsy, banded together to form the Coalition for 1099-K Fairness to fight back against the new rules.
But with the IRS cracking down on every form of alternative payment, expect the agency to stick to its guns.