Many people conveniently use various money transfer apps, such as Paypal for e-commerce transactions, Square for shops, and Venmo for individuals. However, it seems that it may become a little uncomfortable due to the change in tariffs.
The new tariffs related to money transfer apps will be applied from January next year. Under existing tariffs, remittance apps were required to file a 1099-K with the IRS and report it only if the user’s account had at least $20,000 or more and more than 200 business transactions per year. However, the new tariff requires that any business transaction of more than $600 per year must be reported to the IRS.
A business transaction is when a payment has been made for the provision of goods or services. Of course, transactions such as rent splitting or borrowing money are not treated as business transactions and therefore do not have to be reported as tax. However, remittance apps do not know whether the transaction on the user is tax-free or not, so if an individual receives 1099 for a non-taxable income transaction, the taxpayer must explain to the IRS that the transaction is non-taxable.