The IRS is implementing a new rule requiring payment apps like PayPal, Venmo, and Cash App to report freelance income over $5,000 per year. This change will apply to self-employed individuals who use these platforms to receive payments for services rendered.
Here’s what you need to know:
* Payment apps will begin reporting transactions involving freelancers in 2024, starting from January 1.
* The IRS requires payment apps to report income exceeding $5,000 per year, not the number of transactions.
* You can avoid receiving a 1099-K by setting up separate accounts for your professional transactions on PayPal, Cash App, or Venmo.
* Nontaxable transactions like gifts, favors, or reimbursements will not be reported on a 1099-K.
* If you earn income from selling personal items at a loss, this change won’t affect you.
To prepare for this reporting change:
* Make sure to track your earnings manually or with accounting software like QuickBooks.
* Set up separate accounts for your professional transactions on payment apps.
* Confirm your tax information, such as your employer identification number or individual tax identification number, with the payment app.
* Keep a record of your purchases and online transactions to avoid paying taxes on nontaxable income.
By taking these steps, you can ensure compliance with the new IRS rule and avoid any reporting confusion when filing your self-employment taxes.
Source: https://www.cnet.com/personal-finance/taxes/if-you-made-money-via-paypal-venmo-or-cash-app-in-2024-get-ready-for-this-irs-tax-change