Americans who earn at least $600 a year through PayPal will have to report their transactions to the U.S. Internal Revenue Service, the agency said today. Failure to comply with the new rule could result in an audit.
In a reminder to taxpayers, the IRS said that anyone who performs transactions through “third-party” payment facilitators like Venmo and PayPal will have to report those transactions in a form called Form 1099-K. This also applies to payments received through apps like Zelle and CashApp.
According to the agency, the IRS is interested in transactions involving part-time work, gigs, and the sale of merchandise online — such as eBay and Etsy sales. It doesn’t apply to non-commercial payments like reimbursements for food or rent or one-off transactions like selling an old piece of furniture, however.
Prior to the rule, which was instated by the Biden administration, the threshold for filing a Form 1099-K report was at least 200 transactions amounting to at least $20,000.
The rule comes following Congress’ passage of the American Rescue Plan Act of 2021, which had a provision to lower the reporting threshold to $600. The Biden administration said that it hopes to crack down on tax evaders who do not report on the full extent of their income, such as those who work in the gig economy.
As detailed by the New York Post, the proposal was made as a way to pay for the $3.5 trillion social spending bill to invest in climate change initiatives, among other programs.
To facilitate the crackdown on tax evaders, President Biden passed the Inflation Reduction Act, which has a provision that sees around 87,000 additional IRS agents.
Despite the increase in taxes, the Biden administration claims that any American who earns less than $400,000 a year will not have to pay any additional taxes — a fib that Republicans, who remain a minority in the Senate, continue to call out.