(FreedomBeacon.com)- The Internal Revenue Service (IRS) wants to remind you to record payments of at least $600 if you take money for your side gig or business using third-party payment services like PayPal, Venmo, or Cash App.
This guideline is intended for working part-time or having a side company. This won’t apply to you if all you do is transfer money to friends for a meal out or a trip or if you merely get a one-time payment for an internet sale.
Before 2022, there were separate thresholds for third-party transactions for business owners and side hustlers. According to the IRS, people had to record earnings if they had more than 200 such transactions and gross payments that exceeded $20,000. But regardless of how many of those transactions you’ve had, the American Rescue Plan Act requires that any trades conducted after March 11, 2021, that over $600 be disclosed to the IRS.
This is merely a reporting change; these profits were already taxable; thus, there has been no change in the tax legislation.
You must file Form 1099-K, which you should obtain from each third-party payment platform you used to receive transactions, to record these earnings and transactions, according to the IRS. The IRS advises contacting the payment platform for a correction or providing an explanation with your tax return if you inadvertently obtain the form for personal transactions.
If you’re a business owner, especially a new one, tax season might feel considerably more onerous than it already does for people. Keep an up-to-date record of your transactions, balance sheet, and other financial papers if you plan to file Form 1099-K this year. Otherwise, errors in filing can result in an IRS audit.
Working with a qualified bookkeeper or accountant who can assist you in getting organized and making sense of your tax liability is also beneficial so that you don’t feel caught off guard at the last minute. Consider utilizing a business credit card, such as the Ink Business Unlimited® Credit Card or the American Express Blue Business Cash Card, if you need to hire a professional so you may receive rewards for the price. The Blue Business Cash card offers 2% cash back on permissible company expenditures, while the Ink Business card offers 1.5% cash back on all business-related spending.
Due to its various features, including affordable prices, a positive user experience, and professional tax assistance, Select recognized TurboTax Self-Employed and H&R Block Self-Employed as some of the top tax filing software products for small company owners.