LAS VEGAS (KTNV) — The Internal Revenue Service tackling a relatively new frontier for taxation: third-party payment apps. Any businesses getting more than $600 in total payments from the apps will be taxed on that money.
The American Rescue Plan Act lowered tax requirements from $20,000.
Jason Baucom, a financial adviser with the Budin Group, says the new rule is focused on businesses that may be circumventing the system.
“There’s an estimated $166 billion lost every year in unpaid taxes,” said Baucom. He says the new rule applies only to business transactions where an income is actually earned.
“It would have to be a business transaction providing goods or services and being paid for those,” he explained. For people who may be using the apps with friends to split a dinner bill or to help pay rent, you’re in the clear from taxes.
“Those aren’t taxable transactions. Those are consumer discretionary transactions, so that’s a huge difference,” he said.
Baucom says businesses should make sure they have a merchant account on the apps to make sure business and personal transactions are separated.
“So, it’s important for them to distinguish the difference so they can go ahead and not have to worry about paying taxes on something they shouldn’t,” he said.
He says don’t be surprised if the IRS explores other ways to tax other forms of digital payments.
"Digital currency and cryptocurrency going forward, those are some platforms that could be taxed and taken into account right away. So, this is just the beginning, the tip of the iceberg for more of it to happen,” Baucom said.
This rule goes into effect starting January first of next year, affecting your 2022 taxes.