{"id":32140,"date":"2022-12-08T21:44:12","date_gmt":"2022-12-09T02:44:12","guid":{"rendered":"https:\/\/gtm.com\/household\/?p=32140"},"modified":"2022-12-29T12:29:20","modified_gmt":"2022-12-29T17:29:20","slug":"irs-issues-reminder-new-tax-reporting-rule","status":"publish","type":"post","link":"https:\/\/gtm.com\/household\/irs-issues-reminder-new-tax-reporting-rule\/","title":{"rendered":"IRS Issues Reminder About New Tax Reporting Rule for Payment Apps"},"content":{"rendered":"
\"irs-issues-reminder-new-tax-reporting-rule\"

The IRS recently reminded taxpayers about the new tax-reporting threshold when receiving payments through mobile payment apps like Venmo or PayPal. If you receive $600 or more from these third-party payment platforms for work, side jobs, or selling goods, you\u2019ll get a Form 1099-K in January. Occasional babysitters and household workers like nannies \u2013 as well as the families who employ them \u2013 should be aware of this new tax-reporting requirement.<\/p><\/div>\n

UPDATE: The IRS has delayed the implementation of this new tax reporting rule. Receiving payment for services via a mobile app won’t<\/em> generate a Form 1099-K if these payments totaled more than $600 in 2022. The new rule will begin with mobile payments received in 2023.\u00a0 Read more<\/a>.<\/strong><\/p>\n

In sharing tips for the upcoming tax season<\/a>, the IRS reminded taxpayers about the new tax-reporting threshold when receiving payments through mobile payment apps like Venmo, PayPal, and CashApp.<\/p>\n

If you receive $600 or more from these third-party payment platforms for work, side jobs, or selling goods, you\u2019ll get a Form 1099-K<\/a> in January.<\/p>\n

Occasional babysitters and household workers like nannies \u2013 as well as the families who employ them \u2013 should be aware of the new tax-reporting rule<\/a> if they are paid (or pay) through mobile apps.<\/p>\n

\u201cIt\u2019s going to be a new form for a lot of people,\u201d said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA, CPA in Windermere, Florida told CNBC.com<\/a>. \u201cAnd the worst thing they can do is ignore it.\u201d<\/p><\/blockquote>\n

What\u2019s new for tax year 2022<\/h2>\n

You have always been required to report the income you earned, including from part-time work and side jobs. The American Rescue Plan Act of 2021 just lowered the reporting threshold for third-party networks that process payments for those doing business on their platforms.<\/p>\n

Prior to 2022, Form 1099-K was issued for third-party payment network transactions only if your total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single \u2013 or multiple \u2013 transaction(s) totaling $600 or more can trigger a 1099-K.<\/p>\n

Since the IRS also receives a copy of Form 1099-K, the income you report on your tax return should include what\u2019s reported on the form. Otherwise, you may automatically receive an IRS notice or even trigger an audit. Follow the instructions on the form to correctly report this income.<\/p>\n

Receiving a Form W-2<\/h2>\n

There may be some uncertainty for household workers who receive a Form W-2 from their employer and then get a 1099-K from a payment platform because they were paid through a mobile app.<\/p>\n

In its Frequently Asked Questions about Form 1099-K<\/a>, the IRS doesn\u2019t address this issue.<\/p>\n

Nannies and other household employees should receive a Form W-2 at tax time<\/a>. There are different sets of\u00a0tax rules for families and nannies to follow<\/a>\u00a0as opposed to workers who are independent contractors and can receive a 1099.<\/p>\n

To avoid confusion at tax time, the best ways to pay a household employee are through direct deposit or with a paper check.<\/p>\n

When paying a babysitter<\/h2>\n

Paying a date night or occasional babysitter by a mobile app may still ok but they ought to know that this income will likely be reported to the IRS and should be included on their personal tax return.<\/p>\n

Share this information about the new tax reporting rule with your babysitter so that they are aware of the change and that there will be no surprises for them in January.<\/p>\n

Remember this is not a new tax. It\u2019s a new reporting requirement.<\/p>\n

Reporting and declaring any income, either personal or through a business, has always been a requirement when filing taxes with the IRS no matter how payments were made or whether a tax form was generated. So even if your babysitter did not receive a 1099-K in previous years, any taxable income received through these payment platforms was required to be reported on their income tax return.<\/p>\n

Rule aimed at businesses<\/h2>\n

This new requirement is aimed at businesses that use these apps to get around banks and traditional forms of reporting income. The IRS wants to make more transactions reportable, so it is harder for businesses to underreport their taxable income. The provision is estimated to bring in $8.4 billion from fiscal year 2021 to 2031<\/a>.<\/p>\n

Money received as personal transactions<\/h2>\n

Money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable and won\u2019t result in a 1099-K.<\/p>\n

So perhaps an easy way to get around the new rule is to pay your babysitter or nanny as a \u201cpersonal\u201d transaction like they were a family member or friend. However, payments made on a regular basis will call into question whether those payments were truly made to a family member or friend.<\/p>\n

In fact, PayPal, which also owns Venmo, says it will monitor accounts to ensure that personal payments are not being used for the sale of goods and services.<\/p>\n

If you use a mobile app, it\u2019s always best to pay your babysitter as a service transaction.<\/p>\n

More information<\/h2>\n

If you would like more information, visit:<\/p>\n

New Tax Reporting Rule May Change How You Pay a Nanny or Babysitter<\/a> \u2013 GTM Payroll Services<\/p>\n

Should Wealthy Families Fear New Tax Reporting Rule on Mobile Payments?<\/a> \u2013 GTM Payroll Services<\/p>\n

New U.S. Tax Reporting Requirements: Your Questions Answered<\/a>\u00a0\u2013 PayPal Newsroom<\/p>\n

2022 Tax FAQ<\/a>\u00a0\u2013 Venmo Help Center<\/p>\n

General FAQs on Payment Card and Third-Party Network Transactions<\/a>\u00a0\u2013 IRS<\/p>\n

Understanding Your Form 1099-K<\/a>\u00a0\u2013 IRS<\/p>\n

For additional questions, consult with a licensed tax expert.<\/p>\n

Paying your nanny the right way<\/h2>\n

Paying your nanny by a payment app and need to switch? GTM Payroll Services can handle paying your nanny the right way through a live check or direct deposit. We make payday easy and will help keep you compliant with tax, wage, and labor laws. Want to learn more? Call (800) 929-9213 for a\u00a0complimentary, no-obligation consultation with a household employment expert<\/a>. Or\u00a0schedule time with us at your convenience<\/a>.<\/p>\n

Download The Complete Guide to Household Payroll<\/h2>\n

Get our complimentary guide and learn everything you need to know about paying your employees legally and filing your taxes the right way.
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