MEMPHIS, Tenn. — Changes are coming for business owners who use cash apps like Venmo, Zelle, or PayPal.The IRS is making sure they get their cut next year. A new rule under president Biden's American Rescue Plan Act will allow the IRS to take a closer look at cash transactions of more than $600.
App payments are a bit tricky for the IRS to monitor, it's similar to cash payments. So now, apps like Cash App will notify the IRS when transactions get up to $600. Under the original IRS reporting requirements, people are already supposed to report income of $600 or more, regardless of the transaction type, so it's not a new tax. But some business owners got away with keeping more money in their pocket since these apps didn't notify the IRS until transactions hit 20,000 dollars.
Precious Jones is the owner of Fabulous Flavors and Friends Food Truck and Restaurant. She's been in business for about five years and has three food trucks as well as a restaurant in Whitehaven. She said she brings in at least $1,000 a month just from cash app transactions. Jones explained, because of this new rule her customers may have to pay a $3-$4 cash app fee.
"It's not us, it's the system. We can't help it, we just have to go with the rules and regulations. We have to go up but we got to do what we got to do," Jones said.
This new rule is meant to crack down on self-employment workers who received income through apps, not personal payments like if someone paid you back for dinner or gifted you money. If someone is getting a steady stream of money through these cash apps, and it looks like income, then it will make that unreported business income more visible to the IRS.
For people using these applications, they would receive an information report and 1099-K to report any earned income. If a person gets a 1099-K form and but $600+ payments were not income, then they don't have to fill out the form for the IRS and will just have to show proof if they are audited.