Digital payment apps to report earned income to the IRS

Digital payments using an app is how many people do business today. At the start of the new year, the IRS instituted a change in order to collect taxes on those platforms. 

First, FOX 5 I-Team's Dana Fowle say that this is not a tax change. The IRS has always required businesses to pay taxes on money earned, no matter how you get it. It's a reporting change because often money made through the payment platforms goes unreported. 

The third-party apps involve include popular apps like Venmo, PayPal, CashApp, and Zelle. You may use one or all of them. Maybe you send money to the babysitter this way. Or, perhaps a business asks for payment this way now. Previously, these apps only reported income from a user to the IRS if the business had more than 200 commercial transactions that totaled more than $20,000. As of Jan. 1, 2022, these digital payment companies will issue a 1099-K form to you deposited directly into your app if, in a year, you receive more than $600 in business or services. 

Fowle talked with Cobb County’s Donald Williams, the CEO of Williams Accounting and Consulting. He reminds us if you run a business and your tally is under $600 you still owe the IRS, and you always have.

"If I open up my business and I only make $200, it doesn’t mean because it’s not $600 I don’t report that income. You’re supposed to report worldwide income. You’re still supposed to report (that) $200," he told the FOX 5 I-Team. 

Now, let's say you are the sports team mom, and you paid $700 for the snacks and the uniforms for a weekend tournament, you will want to get reimbursed. You do not have to report that as income. You are not getting paid for a good or service. You are just getting reimbursed. Just make sure everyone who pays you marks it as a personal transaction in that app. 

This is the government catching up with years of lost income from people who do business this way. And lots of people who use this are gig workers. During the pandemic, for the first time, they collected unemployment. So, once you take from the kitty, you have to add to it.