Are you using your Venmo or CashApp accounts to process business transactions or accept rent? This just became a little more difficult to navigate with the recent changes to the IRS reporting requirements for processing companies.
I remember strolling through the central park of Savannah Georgia last fall as I was greeted by a sidewalks’ worth of aspiring artists from the Savannah College of Art and Design. I saw a piece I thought would be awesome in my children’s bathroom and asked the student what it would cost. We settled on a price and he gave me his Venmo account so I could pay him directly right there. It was quick and convenient and didn’t require the student to walk around with a swipe tool or anything else to process my transaction. Previously you could process up to $20,000 on your account before being Venmo or similar companies would report to the IRS on your account. This allowed for plenty of people to operate small businesses like selling paintings or collecting rent on a few properties to what they wanted to report to the IRS considering their income.
In a perfect tax world everyone reports every dollar they make but in the real-world service staff seldomly reports their full tips and until you are making a career's salary type of money people are looking for every edge possible to hold onto their hard-earned cash. As of this year companies that process payments need to report to the IRS when accounts transact more than $600. This radical change essentially eliminates the ability to make smaller amounts of money and not report it on your taxes. This article isn’t an opinion of the actual policy but a review of what to do about it.
Reporting. Reporting. Reporting. If you have to report every source of income to the IRS what you don’t want to do is continue to mix your personal Venmo/CashApp account with anything professional. It will create an uncomfortable situation where any audit would require a complete reading of every payment you’ve made and all your personal notes attached to it. Here is an absolutely hysterical comedy sketch about some of the complications of mixing personal and private https://www.youtube.com/watch?v=73R6myIjHQg from Funny or Die. Keeping your personal and professional separate is just sound advice but now that it is harder to get away with not reporting it properly it is essential.
If you properly separate your finances and already report everything, as you should, to the IRS then this change really won’t affect you very much. If you, like millions of Americans, struggle with some of this separation then you need a service like Paylooza which focuses on Recurring business transactions for small businesses and companies getting off the ground. With proper reporting tools, you have all the necessary things needed to report to the IRS and be stress-free come tax season.
Let us know how this IRS reporting change has affected you!
- Paylooza Team