A new IRS rule could threaten the financial livelihoods of small business owners and those with side hustles. Beginning in 2023, individuals who collect more than $600 in payment for “goods and services” on apps like Venmo will be required to report the transactions to the IRS via a 1099-K form, Fox Business reported.
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Until now, apps like Venmo, PayPal, Etsy, and other users only had to send a 1099-K form if their gross income was more than $20,000 for the year or if they had 200 separate transactions.
Related: Your tax refund could be smaller next year, the IRS warns — here’s why
The $600 threshold can have a significant impact on those who have side activities to supplement their income. According to the Pew research center, nearly one in four Americans earn extra money by selling online, renting their home or using digital platforms to get work done. The new rule could discourage millions from participating in the gig economy, Nancy Dollar, a tax attorney at Hanson Bridgett, told Fox Business.
“Everyone I know loads old goods they have on these platforms because it’s so easy,” Dollar said. “Or they have engaged in gig work on a very informal basis, and that also affects gig workers who have understated their income. I think it will force people to either cut back on those activities or take them more .seriously and follow them.”
Related: These are the top tax filing mistakes made by small business owners (and how to avoid them)
Yet there are exceptions. The new rule only applies to goods and services, so all transactions that are a gift, rent payments to a roommate or refund are excluded. In addition, the rule excludes all trades that are considered losses. For example, if you buy a dresser for $200 and sell it for $150, it’s not taxable.
Related: $600 Sold on Peer-to-Peer Apps? Expect a new tax form
