A new rule under The American Rescue Plan Act aims to crack down on businesses that use cash apps to avoid paying taxes.
The Internal Revenue Service will now send 1099-K forms to companies that make cash transactions of $600 or more. Apps like Paypal, Venmo, and Zelle will be affected.
The way it will work is if someone makes a commercial transaction on the app, it will notify the IRS. A 1099-K will be generated and sent to the business owner.
Under current federal guidelines, a 1099-K is generated for electronic payments totaling $20,000 or more and has more than 200 transactions. The threshold will be significantly reduced in 2022.
So far, the new rule only applies to businesses and not personal transactions. So if you Cashapp someone for dinner or rent, for example, it would be subject to tax.
“So far, the new rule only applies to businesses and not personal transactions. So if you Cashapp someone for dinner or rent, for example, it would be subject to tax.”
There seems to be a contradiction in the above sentence. Would or would not?