Under the American Rescue Plan of 2021, payment apps like Venmo, PayPal and Cash App were ordered to send 1099-K tax forms to the Internal Revenue Service (IRS) and to people who earned at least $600 via the platforms starting with 2022 taxes.
But last year, the IRS delayed the $600 tax reporting rule for payment apps, meaning that similar to prior years, users of cash apps would only receive a 1099-K tax form if they made $20,000 in revenue from over 200 transactions.
Recent online searches show people are again looking for answers on the latest reporting rules. This viral tweet says the IRS not only delayed the rule, but raised the threshold for reporting for the 2024 tax year.
THE QUESTION
Did the IRS change the tax reporting threshold for mobile payment app users?
THE SOURCES
THE ANSWER
Yes, the IRS did change the tax reporting threshold for mobile payment app users. Beginning in 2025 (for the 2024 tax year), the IRS will send 1099-K forms to anyone who collected more than $5,000 in income through payment apps during 2024. Originally, the agency said the threshold for reporting would be $600.
WHAT WE FOUND
Prior to March 2021, when the American Rescue Plan of 2021 passed, the IRS reporting requirement for users of third party apps was $20,000 in aggregate payments and 200 transactions. The American Rescue Plan lowered the reporting requirement to $600, with no minimum transaction number.
The change was supposed to go into effect for income earned during calendar year 2022, with the first 1099-K tax forms being sent in 2023. But in December 2022, the IRS delayed the implementation of the tax rule by a year.
On Nov. 21, 2023, the IRS again updated its reporting guidelines. The IRS not only announced it would delay implementing the new rules again by a year, but also raised the reporting threshold for income earned in 2024 from $600 in reportable income to $5,000.
So, for people who are filing their taxes for calendar year 2023, the reporting requirement is still $20,000 and 200 transactions. For people filing their taxes for calendar year 2024 and receiving income through third-party apps, the reporting threshold will be $5,000.
The IRS called the raise in threshold a “phase-in” to implement the $600 reporting requirements, which means the $600 reporting requirement could still come at a later date.
Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K, the IRS says.
The sale of goods and services that are considered income should be reported on a Form 1099-K. But, there was some confusion about transactions like selling personal items like clothing or furniture, and that “complexity in distinguishing between these types of transactions” factored into the IRS’ decision to delay the reporting requirements, according to the IRS.
VERIFY reached out to PayPal and CashApp for comment on the changes, but did not hear back at the time of publication.
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