The IRS recently announced new rules that will go into effect in 2023 with respect to payment processors such as Venmo, PayPal, Cash App, Square, and other payment apps. While there is no change to the taxability of income realized through payment processors, there are now more stringent reporting requirements.
Beginning with the year 2022, payment processors will be required to report any single transaction of $600.00 or more and the total amount of business transactions if they exceed $600.00 in the aggregate. That compares to the previous rule requiring reporting if a business had more than 200 transactions totaling $20,000 or more. Now, a single transaction will trigger a 1099-K.
The rules only apply to business transactions, but it is possible that a single personal transaction of $600 or $600 of combined personal transfers might trigger a 1099-K. If that happens, the payment processor should be contacted to correct the 1099-K. This yet another reason to avoid commingling personal financial matters with business financial matters.