CHARLOTTE, N.C. — A new tax rule could have a huge impact on people who use third-party payment apps like PayPal, Venmo and Zelle.
We're more than halfway through 2024, which also means we're about halfway to tax season. And if you use these third-party sites for business transactions, there's a good chance the Internal Revenue Service (IRS) wants to monitor your activity.
Here's how the new IRS third-party platform payments rule takes effect in 2024.
OUR SOURCES
- Mark Steber, tax information officer with Jackson Hewitt Tax Services
- The IRS
WHAT WE FOUND
In a time of electronics, you probably use popular apps like Zelle, Venmo, Paypal and others. Since their inception, people would fill out a form 1099 if they made more than $20,000 through those apps.
That's about to change. Starting with tax year 2024, the number has gone down to $5,000. It's all part of the 2021 American Rescue Plan. The IRS initially wanted the new rule to take effect in 2023, but confusion led the agency to push it back a year.
"They changed it to this tax year to $5,000," Steber said. "If you have $5,000 worth of transactions, and we are talking business here, then that will get a 1099 sent to the IRS."
The threshold for reporting third-party payments will eventually go down to $600. Reporting requirements do not apply to personal transactions, like birthday or holiday gifts. It also doesn't apply to family members who split the cost of household bills or other fees. This is strictly for businesses that use third-party apps for payments.
"If it's a personal activity loaning money, or sending money for lunch that personal activity and that is not what is meant to be captured by this," Steber explained.
However, because this is a new threshold, Steber said there may be some confusion when it is time to do your taxes. So start planning and tracking now.
"It is new that these platforms have to track and there may be confusing information, but the IRS is aware of that and has transactional correction measures," Steber said.
Steber said anyone who receives a 1099 in the mail or has questions should consult with a tax professional before filing their 2024 tax return.
Contact Meghan Bragg at mbragg@wcnc.com and follow her on Facebook, X and Instagram.
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