A new tax law that took effect at the start of 2022 is not being welcomed by users of mobile payment services.
What Happened: Starting this year, the IRS is requiring mobile payment apps such as Zelle, Block Inc.’s (NYSE: SQ) Cash App and Paypal Holdings Inc.’s (NASDAQ: PYPL) Venmo to report business transactions totaling more than $600.
The new provision only affects businesses that accept payment cards or use third-party network settlement organizations for payment of goods and services, according to the Internal Revenue Service.
Previously, the reporting requirement threshold was $20,000, so the new tax burden is leading many users are to turn their backs on the apps.
“Honestly, I’m using Venmo because there’s no taxes,” and if it “starts to have taxes, I’m not using it anymore,” one Venmo user told Fox News.
Venmo users will be able to download their tax documents directly from the company when they become available sometime in January, according to a press release.
“Reporting and declaring any income, either personal or through a business, has always been a requirement when filing your taxes with the IRS,” reads a press release from PayPal.
Why It Matters: The new law will likely impact numerous small businesses and industry segments. Jonathan Medows, a CPA for independent contractors in New York City, says about half his clients, which include “hairdressers, dog walkers, financial consultants,” use digital payment platforms rather than checks, credit cards or cash.
The update in the tax regulation was included in the American Rescue Plan Act passed in March. “It’s inevitable,” one man told Fox News. “The government has to keep track of all money and they’re getting rid of cash.” Venmo is “replacing it.”
Related Link: Why This Big Time Investor Disagrees With Jeffries’ PayPal Downgrade
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