New law could change everything about the way we use payment apps

Starting this year, Venmo, Zelle, PayPal, Cash App, etc. could look a little different.

WILMINGTON, NC (WWAY) — Tax time is upon us. And if things weren’t complicated enough, starting this month, a new change to a law will mean people who use payment methods like Venmo, PayPal, Zelle, and Cash App might need to keep better records of the transactions for the IRS.

Starting January 1, folks who make more than $600 from selling goods and services using the apps must report it to the IRS.

Accountant David Lewis says these apps are now required by law to send you the necessary tax forms.

“Thereafter, any transactions you run on Venmo, or do on Amazon, any of the other cash apps, if your total exceeds 600 dollars for the year, they will send you a statement,” Lewis added.

The rule was signed into law in 2016, but originally only applied to people receiving $20,000 or more and at least 200 transactions. This alteration, which will affect next year’s tax season, could mean a change for hundreds in our region.

“There’s so many people who started buying and selling or doing the resell since COVID hit,” reseller, Kristy Louden explained. “I mean a lot of us lost our jobs.”

Louden runs a successful resale business in the Cape Fear, advertising goods on Facebook, Instagram, and EBay, while cash apps for purchase.

Her main concern: Does this mean she’ll be taxed for personal app use as well as business transactions? Like splitting a meal with a friend, or selling a pair of her daughter’s shoes?

“I don’t know how they’re going to differentiate the two,” she worried.  “You know if I’m selling just stuff that I would put in a yard sale versus something that I’m selling to make money for my business.”

According to Lewis, there’s a plan in place for that, but business owners should still take note of their transactions.

Lewis explained, “If it’s a personal transaction, you can exclude that on your tax return when you file. Just say that was a personal transaction.”

Though the change won’t affect this tax season, Lewis says it’s never too early to make next season a little less complicated.

“My best advice,” he said, “is if you’re in that type of a situation to get some professional guidance right now before. As the year is early, you’ll have the records you need come tax time next year.”

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