Jun 16, 2022
Why are payment apps tracking my transactions?
The IRS has made a new income tax reporting rule, beginning this year. Because many entrepreneurs and side hustlers now use Venmo or other third-party payment apps for their transactions, these apps are now required to report transactions for goods and services that are over $600 as taxable income. If you’re not careful in how you label your transactions, you might receive a 1099-k this year.
How can I make sure I don’t get a 1099-k?
Be sure to label any payments you make as something other than a good or service. Because apps like Venmo and PayPal are going to be monitoring transactions now, it’s important that you do this. Some apps also offer the ability to have business profiles or “friends and family” profiles. Using this feature can also prevent a future 1099-k in your mailbox. An exception of this new rule is the payment app Zelle - they do not report transactions on their platform to the IRS.
What do I do if I receive a 1099-k?
If you do receive a 1099-k for something nontaxable, you will have to call the payment app company and ask them to send a correction to the IRS. An example of this would be selling a personal item for over $600 - if your proceeds are less than what you originally paid, they are not taxable. It’s important to hold onto documented proof of nontaxable sale to provide to them in case you receive a 1099-k for it.
Financial Planning Associate
Melissa came to Narwhal in the summer of 2018 following the completion of her master’s degree in financial planning from the University of Georgia, where she also earned her bachelor’s degree in consumer economics. Her interest in the field started with learning about consumer behavior, specifically its relation with complex moneymaking decisions. Melissa recently received her CFP® Certification in January 2021. Working with a CFP® professional can help you find the path to achieving your financial goals. Your goals may evolve over the years as a result of shifts in your lifestyle or circumstances such as an inheritance, career change, marriage, house purchase , or a growing family. Melissa is here to help you through that process. When she’s not working, Melissa enjoys cycling, cooking, and spending time with her beagle and two nieces.
At Narwhal Capital Management, you’re more than just a portfolio, and it’s not all about the numbers. Let’s start with a meeting about your needs and future goals.