ReCasa Financial Blog
Changes in 2022 for Mobile Payment Apps
Mobile payment apps such as Venmo, Cash, Zelle and PayPal are now required to report commercial transactions totaling $600 or more per year to the IRS. This reporting change started as of January 1, 2022. Not only are these apps used for transferring money between friends and family, but some businesses use them as well.
These applications will now have to supply 1099-K forms to users who, in one year, make more than $600 in commercial transactions. These forms should be released by January 31, 2023 to those who meet this criteria. This reporting change is part of the American Rescue Plan Act that was passed in 2021. Previously, these payment apps were only required to report when a user had more than 200 commercial transactions totaling $20,000 or more per year.
These payment apps usually give each user the ability to mark if the payment is either friends and family or goods and services. A commercial transaction is considered any transaction where you will be making a profit. If you sell a couch to someone for less than you paid for it originally, then that is not considered a commercial transaction. However, you may want to keep reports to prove that you didn’t make money on the purchase in case you are audited. Though PayPal reports, “Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service.” This may be because marking it goods and services provides support if something goes wrong with the transaction such as the buyer not receiving the item purchased. According to Venmo, “Senders can tag a purchase as ‘goods and services,’ whether it’s for a product you sell, a service you provide, or even an old couch you don’t want anymore. This helps create a safer marketplace by making both the buyer and the seller eligible for Purchase Protection if something goes wrong on either side.”
It is recommended to create two accounts for these mobile payment apps, one for personal use and one for commercial use.
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