Tax reporting requirements are changing for third-party payment networks such as Venmo or CashApp.
The new rule states that third-party companies that handle the settlement of funds — a process of transferring funds from a buyer to a seller in a transaction — are required to report $600 or more for goods and services to the Internal Revenue Service. The law, which was enacted as part of the American Rescue Plan, will affect 2022 tax returns filed in 2023.
Early Warning Services, which operates Zelle, states in an email that it is not subject to the law since it provides messaging between a financial institution and people making payments.
Farriers who use third-party payment networks should consider establishing separate accounts for your business and personal transactions. This approach will ease tracking business transactions, as well as prove taxable and nontaxable income sources in the event of an audit.