Proposal Made to Raise Venmo, PayPal Tax Reporting Requirement to $10,000 – How Could It Impact You?
Sens. Joe Manchin (D-W.Va.) and Bill Hagerty (R-Tenn.) have proposed an amendment to the $1.7 billion funding package, to raise the $600 reporting requirement for third-party payment networks such as Venmo and PayPal, to $10,000.
“This is the best relief we can get for people,” Manchin told CNBC about the $10,000 threshold, adding that it was “the best way to approach it.”
The lower threshold was enacted as part of the American Rescue Plan (ARP), in March 2021. Now, the Internal Revenue Service (IRS) requires reporting of payment transactions via payment apps such as Venmo, PayPal, Stripe and Square, for goods and services sold that meet or exceed $600 in a calendar year.
The threshold for reporting was significantly lowered, as the former requirement was to report payments above $20,000 and exceeding 200 transactions within the calendar year, according to the IRS.
It’s important to note that this change applies only to payments received for sales of goods and services and not to friends and family payments, for example.
Venmo says on its website that what makes a payment “goods and services” is when senders tag a purchase as “goods and services,” whether it’s for a product you sell, a service you provide or even an old couch you don’t want anymore.
However, several experts and organizations have argued against the new rule, in part because it might create confusion.
The American Institute of CPAs (AICPA) for example, wrote a letter to the Senate Finance Committee and the House Ways and Means Committee on Dec. 16, expressing its “deep concerns” regarding the reporting threshold.
AICPA said it supported the suggestion from The National Taxpayers Union Foundation (NTUF) to revert the change.
Both organizations also said that even increasing the requirement to $5,000 would make a difference.
“Setting the level at, say, $5,000 would not eliminate the entirety of the paperwork challenges associated with a new 1099-K standard, but it would make significant progress toward that goal while shielding taxpayers, platforms, and the IRS from some of the worst administrative fallout,” the NTUF said in a statement.
As for Hagerty, he led a group of Republican senators in February 2022 to introduce the Stop the Nosy Obsession with Online Payments Act (SNOOP) to strike the tax code provision.
“As a result of the new provision, thousands of small businesses will have to fill out 1099-Ks to provide their personal information to the IRS, despite the IRS’ poor history of safeguarding Americans’ personal data,” according to a statement at the time.
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