Parkside Advisors

Independent Investment Management

Upcoming Changes to Tax Reporting Requirements for Payment Apps

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The American Rescue Plan Act (ARPA) signed into law March 11, 2021, expands reporting requirements for third-party settlement companies such as PayPal, Venmo and Zelle.

This law will affect taxpayers receiving payments for goods and services totaling $600 or more through third-party settlement companies beginning January 1, 2022.  Taxpayers will receive a Form 1099-K reporting taxable income includable on their tax returns.  The previous annual requirement for a 1099-K was $20,000 or more in the value of transactions or 200 or more transactions.

It is likely that companies will issue Form 1099-K based on their User Agreements, which generally specify whether an account is used for commercial or personal transactions.

If you are using third-party settlement companies for both business and personal cash transfers, we recommend creating separate accounts to avoid commingling non-taxable receipts with business income.

You can read more about the new Form 1099-K requirements here.

Please contact us if you have any questions.

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