The IRS delays a tax-reporting rule for peer-to-peer apps. Freelancers are relieved.
The IRS delays a tax-reporting rule for peer-to-peer apps. Freelancers are relieved.
Tax season officially begins next week, and businesses and gig workers that get paid via peer-to-peer apps can relax a little bit.
The IRS had been planning to require PayPal, Venmo and other competing apps to send a 1099 form to every user who took in over $600 in business transactions in 2022. The old threshold was $20,000.
But just before Christmas, the agency announced it would give those platforms — and the businesses and freelancers that rely on them — another year to get their ducks in a row.
Peer-to-peer apps started the pandemic as a tool to split bills with your roommates, but they’ve become a lifeline for small businesses.
“Babysitters, house cleaners, getting haircuts and manicures,” said Caroline Bruckner, a tax expert at American University.
Lots of formerly under-the-table cash transactions now leave a digital trail, she said. Next year, individuals and business owners will get a snapshot of that taxable income in the form of a 1099.
“This change does not change how much tax people actually owe,” Bruckner said, adding that time’s up for anyone who was getting away with something.
Rafael Espinal heads up the Freelancers Union, which encourages members to report all their income. Still, “I think that independent workers were scrambling,” he said.
In some cases, Espinal said, that’s because they were using the same Venmo or Cash App account for personal and business transactions.
“The delay is definitely welcome news,” he said. “This extra time gives them the cushion they need to ensure that they’re following the rules.”
“I think we can all just, like, be a little bit relieved that we’ve got some time,” said Claire Van Holland, who runs an accounting firm that specializes in freelancers.
Roughly half of her clients rely on peer-to-peer apps. For them, she said, now’s the time to get organized to avoid a headache next year.
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