IRS is cracking on down on digital payments based on a new law
Starting January 1, third-party payment networks, such as PayPal and Venmo, must report to the internal revenue service any purchases for products or services in excess of $600. Under previous legislation, such 3rd party digital payment processors had to submit returns to the IRS for a “participating payee” in the network only if transaction amounts to the participating payee exceed $20,000 and the variety of purchases with such payee surpass 200. Charge card firms and also banks, nonetheless, should report any kind of settlement purchases for products or solutions, regardless of price. The internal revenue service records include the address, taxpayer, and name identification number (TIN) of each participating payee and the gross amount of the reportable repayment. The IRS coverage kind as well as instructions can be found on its website.
How does new tax reporting from these Third parties impact bloggers and influencers?
This means that if you as a blogger or content creator receives income from a client via Paypal, Venmo or another third party app in excess of $600 these payment processors are required to report it to the government. While this may not be alarming for some, as they are reporting this as income anyway, the troubling thing about this is the fees that will no doubt be imposed by these processors to manage this new requirement.
The Government’s Build Back Better Proposal, would also call for such third-party settlement networks to use back-up tax obligation withholding to settlements in excess of $600. Under the new law, back-up withholding is required by a payor for products and services if the repayment recipient fails to supply their TIN, the IRS alerts the payor that the TIN furnished is incorrect, or the Internal revenue service notifies the payor of an underreporting by the payment recipient.
Who knows when this new fee structure will go into affect, but one thing is for sure, these payment processors are not going to simply absorb this cost. Venmo, Paypal, Payoneer and any other processors that are required to add the staff for this excessive and time consuming reporting will no doubt pass on these costs to the consumer in no time. It’s just another way to squash the independents and freelancers.