A new IRS rule could threaten the financial livelihood of small business owners and those with side hustles. Starting in 2023, individuals who collect more than $600 in payment for “goods and services” on apps like Venmo will have to report the transactions to the IRS via a 1099-K form, Fox Business reported.
Until now, apps like Venmo, PayPal, Etsy and others were only required to send users a 1099-K form if their gross income exceeded $20,000 for the year or they had 200 separate transactions.
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The $600 threshold could significantly impact those who have side hustles to supplement their income. According to the Pew Research Center, nearly one in four Americans makes extra money through online sales, renting their home or using digital platforms to do work. The new rule could discourage millions from joining the gig economy, Nancy Dollar, a tax lawyer at Hanson Bridgett, told Fox Business.
“Everyone I know offloads old goods that they have on these platforms because it’s so easy,” Dollar said. “Or they’ve been engaging in gig work on a very casual basis, and that affects gig workers as well who have been underreporting their income. I think it’s going to force people to either cut down on those activities or kind of take them more seriously and track them.”
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Still, there are exceptions. The new rule only applies to goods and services, so any transactions that are a gift, rent payments to a roommate or reimbursement will be excluded. Additionally, the rule excludes any transactions that are considered a loss. For example, if you buy a dresser for $200 and sell it for $150, that will not be taxable.
Related: Sold $600 on Peer-to-Peer Apps? Expect a New Tax Form