An image shared on Facebook claims that all transactions totaling over $600 made on third-party payment apps like Venmo and PayPal will now be subject to taxes.
The American Rescue Plan requires all business transactions made on third-party payment apps totaling over $600 to be reported to the Internal Revenue Service (IRS) starting in 2022. The bill does not impose any new taxes and most personal transactions would be exempt from the reporting requirement.
Social media users are sharing a Facebook image that claims people who use third-party payment apps such as Venmo or PayPal will be taxed on all transactions “totaling up to over $600” starting in 2022. “That is one $600 or six hundred $1 transactions,” the image reads in part. “If you have a side hustle…don’t use those apps.”
The post appears to be based on a misinterpretation of a provision in the American Rescue Plan, a bill that was signed into law by President Joe Biden in March 2021. Among other things, the bill lowered the reporting threshold for commercial transactions from $20,000 to $600 starting in 2022, according to Fox Business. This means that third-party payment apps must now report all business transactions on their platforms that total over $600 to the IRS, the outlet reported.
However, the bill does not impose any new taxes. It only implements new reporting requirements. All income, unless specifically exempted by law, is considered taxable, according to the IRS. This extends to income received on Venmo and PayPal. (RELATED: Do The NFL, NBA And MLB Have Tax-Exempt Status?)
The new reporting requirement also only applies to business transactions totaling $600 or more, not “any transactions totaling up to over $600,” as the post claims. Personal gifts, charitable contributions or reimbursements to personal acquaintances do not need to be reported according to the Senate Joint Committee on Taxation.
“It is incorrect to say that all transactions totaling $600 and more on third-party settlement platforms would be considered taxable income,” said Garrett Watson, a senior policy analyst at the Tax Foundation, in an email to Check Your Fact. “The American Rescue Plan Act of 2021 lowered the transaction threshold for reporting transactions to the IRS through Form 1099-K. This provides more information to the IRS and the taxpayer, but does not change whether any particular transaction is taxable.”
The post also claims that users must now pay taxes on items they sell for a loss, which is likewise incorrect. If a person sells a personal item, such as a TV, for a lower price than the original purchase price they would not need to pay taxes on the income received from the sale, according to Fox Business.
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