HUNTSVILLE, Ala. — Starting this year, the IRS is legally requiring all transactions totaling over $600 dollars on third party apps like CashApp and Venmo to be reported. This will change the way that you file your taxes next year.
Tobias M. Mendelson, Clinical Assistant Professor of Accounting at UAH, says, "There's no telling how many probably if not hundreds of millions of dollars are not being reported to the IRS."
If you receive over $600 through these apps, you'll need to complete a 1099-K form. But you don't have to report all of the money you receive. Here are a few exceptions, like if you receive money from someone as a gift or for reimbursement, or even from a roommate to pay their share of the rent. You don't need to report this to the IRS.
Mendelson says, "I always tell folks there's tax avoidance which is using the tax laws to your advantage and minimizing your tax bills, or there's tax evasions which is where you're realistically skirting the laws, you're just completely violating the laws."
Lots of small businesses use these apps to keep track of payments from their clients as well as to their employees. Experts say, this year keep detailed payroll and receipt records of all of your transactions. Why? Mendelson explains, "The folks using Venmo or Paypal, when they're providing a service or they're selling goods, that is tax evasion because you're supposed to report it. Even if it's a dollar."
What about teenagers?
Anyone who makes more than $12,550 in a year is required to file a federal tax return, but most teens working seasonal jobs earn less than that, so they aren't required to file by law.
However, experts say filing your teen's taxes could actually help them in the long run. Mendelson says, "The teenagers are probably pretty easy because if they're working part-time or full-time summer jobs, most of them are going to have taxes taken out of their paycheck, so if they make a couple thousand bucks, they're not going to owe any tax and so the only way to get their refund is to file a tax return."
Helping teenagers file their taxes early also gives them the opportunity to start investment and retirement accounts.