Be aware of a few new rules regarding how banks should report your deposits. Not to worry—we’ve got the breakdown for you!
And we’ve got to say, this new rule makes sense because business owners are required to file a 1099s for vendors that they pay $600 or more to in a year. With more people using electronic funds rather than cash, it’s easier to have the processor issue the 1099 than the business owners.
Erin Leigh did a fantastic job of explaining this new update. Check out her Facebook page here. Her post from Jan. 5 shared:
Good Morning!! I keep seeing posts about PayPal/CashApp/Venmo, etc., and as everyone’s favorite tax lady, I have been seeing a lot of panic regarding these platforms and some incorrect info being posted.
WHAT IS HAPPENING:
Third-party payment networks (like Square, PayPal, Stripe, Venmo) are now required to issue Form 1099K for any individuals or businesses that process over $600 in payments.
WHAT CHANGED:
The federal reporting requirement decreased from $20,000 in payments AND 200 transactions to just $600 in payments.
Meaning this has always been a rule—it is not new. The threshold was just much higher previously, so the impact is that many more taxpayers will receive a 1099K for the 2022 tax year.
WHAT THIS MEANS:
••• This rule applies to self-employed individuals and small businesses that use third-party payment networks to process payments.
••• Those qualifying as the above must either have a business account set up with the service OR accept payments using the “Goods and Services” option.
••• So, if you use ANY payment service for your business transactions AND process over $600 in sales, a 1099K will be issued with your total accumulated income for the year.
••• I keep seeing posts hyper-focused on Venmo/PayPal/CashApp, but the reality is that this rule applies to ANY third-party service you use to accept payments for your business, which means this rule INCLUDES services like Stripe and Square. *** You CANNOT get around this rule by using Square like many of the posts or comments claim. ***
••• AGAIN, this only applies to BUSINESS accounts or payments that are marked as “goods and services” … meaning the person sending the money to you physically checked a box, selected the radio button, or chose the option from a dropdown during their payment completion process to SPECIFICALLY indicate they are paying you for a good or service.
