The new IRS rules changes the financial fabric for individuals and small business owners.
The tax filing experience in 2023 will be a massive jolt for small businesses and Americans who earned a living online the past year. The IRS issued a warning to small businesses last month about the $600 threshold. Third-party transactions exceeding $600 will trigger Form 1099-K.
So, what does this mean for individuals and small business owners in America? Read on to learn more.
About the new IRS rules
Previously, if a user's annual gross income was over $20,000 or made more than 200 transactions using the payment app, the app had to provide them with a Form 1099-K.In 2023, however, taxpayers will have to disclose to the Internal Revenue Service (IRS) any payments of $600 or more received from services like Venmo, Cash App, or PayPal. If a user makes yearly business transactions of more than $600 through a third-party payment processor, that user's transactions will be reported as a new IRS rule.
This new regulation is focused on monetary gains from the sale of goods and services. Any money transferred via Venmo or PayPal to send money to a friend or family member for gifts or reimbursement is not covered. Moreover, if something is sold for less than the amount it was bought for, this new IRS rule will not apply to it.
What the new IRS rule means for small businesses
Democrats made this adjustment in March 2021, when they approved the American Rescue Plan without support from Republicans. For now, the form will only be triggered by a single transaction of $600 or more. The new IRS rule is meant to penalize those who try to avoid paying their fair share of taxes by concealing a portion of their gross income.
Critics argue that it is an extreme example of government intervention that might damage small businesses. Millions of Americans who supplement their incomes through digital activities are at risk of being caught in the lowered reporting threshold with the new IRS rule in place.
Clearly, it’s time to start saving and managing your money better, and we have the tips to help you do that. Explore our website for various budgeting tips and healthy money habits. Subscribe to Calle Ocho News as we bring you latest news and updates from Miami, Florida and beyond.