While the apps are easy to use, starting next year, filing taxes for millions of people could become trickier.
— Monica Colburn helps run a Virginia hair salon. But like a growing number of Americans, she uses her flexible schedule to earn extra money.She works weddings and promotes musicians."I think last year, I had eight 1099s," she said. "If I didn't have multiple ways that somebody could pay me, I feel like I would lose business," Colburn said.
A new IRS rule will require anyone who earned over $600 on payment apps in 2023 to file a 1099-K form. The previous threshold was $20,000 on over 200 transactions."This is not a tax law change," explained Lisa Greene-Lewis with TurboTax."This is just a reporting requirement for those third parties like Venmo, PayPal and the credit card companies."
According to the IRS, money exchanged between friends on those apps should not be taxed. As added protection, experts warn users to classify their transactions to family and friends as personal, not goods or services.The IRS expects to receive about four million 1099-K forms next year, which the agency claims it will be able to handle.
However, some small businesses, such as that of Maryland furniture maker Dennis Turbeville, are concerned that the extra paperwork from this change could lead to mistakes and prompt costly penalties. "Small businesses don't have the resources to understand how to do things properly," Turbeville said."A $2,500 penalty for a business that's doing $2 million a year, not a big deal. For somebody like me, that's a big deal."
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