BINW Blog: What Is The New $600 Digital Transaction Rule With The IRS? Here’s What You Need to Know.
Online sales boomed during the pandemic, and the government took note. A lot of micro businesses have depended on third-party apps like Venmo and Cash App this entire time. This seems like a good solution, but only for the short term. If your side hustle, micro business, hobby selling, or reselling business will make digital transactions totaling $600 or more this year through these apps, it will need to be reported to the IRS. This new rule went into effect beginning January 1, 2022. This means you will need to monitor your income this year to report it in 2023.
WHAT DOES THIS MEAN FOR YOUR MICRO BUSINESS?
The rule is mostly affecting the way third-party apps like Venmo and Cash App behave. Essentially, they are now required to give you a 1099-K form. The form will report the total gross income you received during the year without any consideration of losses (adjustments, discounts, or refunds). You will need to have a system to track any dollar amount reported that comes at a loss.
Source: Business Impact Northwest Blog