New Tax Rule Targets Small Businesses

We all know the economy has been suffering for a few years now, and small businesses are bearing the brunt of the decline.

And, despite the damage to many U.S. businesses, the government is not making things any easier. Instead, as part of the American Rescue Plan Act for 2022, enacted a tax regulation requiring online payment platforms like Venmo, PayPal, Stripe, and Square to report all combined business payments exceeding $600 to the IRS using a 1099-K form. This rule specifically pertains to payments for goods and services, exempting personal transactions among friends and family. Previously, the threshold was set at $20,000 in income and 200 or more transactions.

This tax rule, initially slated for implementation in tax year 2022, was postponed by a year, now taking effect for tax year 2023 starting from January 1, 2023.

For independent contractors receiving payments through these platforms, it's crucial to reconcile 1099-K forms with 1099-MISC forms from clients to avoid double taxation on the same earnings. According to IRS regulations, if a gig worker is paid via a third-party processor like Venmo, the payer is not obligated to issue a 1099-MISC; this responsibility falls on the payment platform, which must file a 1099-K.

Individuals should also be vigilant to ensure that funds received through Venmo for personal transactions are not mistakenly taxed. To safeguard against fees or tax implications, users can switch off the "Turn on for purchases" option. If a transaction is mistakenly marked as a business purchase, resulting in fees, the sender (not the recipient) should promptly contact Venmo support to request a refund of the fees.

Find out how to plug profit leaks in your business at my friend Caroline's upcoming class!

IN CASE YOU MISSED IT, check out my last blog post!

?? Join the Conversation

Have thoughts on the blog post?

Interested in discussing strategies to thrive in the age of constant change? Join the conversation on social media using #thefutureofmarketing. We'd love to hear your insights, questions, and success stories.

Thank you for being a part of the community. We look forward to bringing you more insights, tips, and resources to help you navigate the evolving world of marketing.

Subscribe to my newsletter to receive updates straight to your inbox and stay informed about all our upcoming events, podcast episodes, and more.

Our latest podcast episode is now live!! ?? Tune in to listen as we explore the evolving world of CS and how it can shape the customer experience. ??

?? Or watch on YouTube: The PA System

?? Upcoming events: Ring the bell to stay on top of all the latest happenings!

Until next time,?

Pamela

Liked this post? Want to see more?

?? Ring it on my Profile

??Supporting your marketing success.

?? Providing solutions that are spot on.

?? Connect with me