Paypal Changes for 2022


If I understand this correctly, Paypal, along with all on-line payment sources like Venmo, etc. will now be sending out 1099 forms for all payments totaling $600 you receive in 2022 for goods or services.  The only way around this is to use Paypal friends and family for payment which eliminates any buyer protections.  Is everyone aware of this?

 

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Showing 4 responses by dave43

I believe this is $600 total for the year, not just transactions that each total $600 or more?  

If you own your own business or have a side hustle and get paid through digital apps like PayPal, Zelle, Cash App or Venmo, earnings over $600 will now be reported to the IRS. A provision from the 2021 American Rescue Plan, which went into effect on Jan. 1, directs third-party payment processors to report transactions received for goods or services totaling over $600 per year to the IRS. 

Prior to this legislation, a third-party payment platform would only report to the tax agency if a user had more than 200 commercial transactions and made more than $20,000 in payments over the course of a year. 

The key thing to know right now is that it doesn't apply to your 2021 tax return, which you'll file this tax season. But it will apply to the earnings you make throughout 2022, which you'll report when you file in 2023. 

So, what's the solution?  Do we have to keep track of what we paid for an item vs. what we sold it for or won't that matter?  If you sell $5,000 worth of equipment this year, you'll get a 1099-K for $5,000 for additional income?

Got it.  It looks like we have to file a schedule C to list cost of goods sold and can write off travel expense, packing materials, etc.  Seems like a real pain, but the only way to keep from paying tax on the total amount listed on the 1099.