- The new rules took effect January 1, 2022.
- The IRS will receive a copy of any tax forms issued by the third party payment platform to a user who meets the criteria.
- Personal transactions are not taxable.
Payments over $600 on platforms like PayPal and Venmo are now being reported to the IRS. The new rules, which were part of the 2021 American Rescue Plan, took effect January 1, 2022. PayPal and Venmo previously announced in April of 2021 that users would be able to buy, sell, and hold crypto using their platforms.
Before the new rules took effect, third party payment platforms would only report to the IRS if a user had more than 200 commercial transactions and made payments of more than $20,000 during the course of the year.
It’s important to note that this is just a tax reporting change. Self employment and certain other types of income were already taxable, and will continue to be. The IRS will receive a copy of any tax forms issued by the third party payment platform to a user who meets the above mentioned criteria.
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Personal transactions, such as gifts or reimbursements, are not taxable.
As a result of the new reporting requirement, third party payment platforms may be requesting tax information, such as a social security number, from users.
Users of third party payment platforms should maintain detailed records of their transactions and can consider setting up separate accounts for their personal and business activities.
It is important that users understand the tax implications of their digital transactions and thus should consult their professional advisors for assistance.