Venmo/PayPal/Cash App Users-New IRS Regulations

[Beancounter]

https://news.yahoo.com/did-sell-old-desk-online-183708171.html?soc_src=social-sh&soc_trk=ma

I opted to post this in The Deli section because it is more likely to be seen and read here.   Please feel free to move it to wherever it might be more appropriate.  This is an interesting read and something both clients and providers need to be aware of. 
 

New IRS regulations stipulate the issuance of a 1099K for all individuals who receive more than $600 via services such as Venmo, Pay Pal, CashApp, etc.  The old threshold for issuance of a 1099K was $20,000.  This will especially impact some providers who use these types of services to receive their fees.
 

The article explains it much better than I ever could.  Knowledge is power.  

[sincitymix]

10 minutes ago, Beancounter said:

https://news.yahoo.com/did-sell-old-desk-online-183708171.html?soc_src=social-sh&soc_trk=ma

I opted to post this in The Deli section because it is more likely to be seen and read here.   Please feel free to move it to wherever it might be more appropriate.  This is an interesting read and something both clients and providers need to be aware of. 
 

New IRS regulations stipulate the issuance of a 1099K for all individuals who receive more than $600 via services such as Venmo, Pay Pal, CashApp, etc.  The old threshold for issuance of a 1099K was $20,000.  This will especially impact some providers who use these types of services to receive their fees.
 

The article explains it much better than I ever could.  Knowledge is power.  

That is only if you label the transaction as goods or services. 

Edited October 2, 2022 by sincitymix

[+ DrownedBoy]

Hence, for the "Reason" in Venmo, I try to say, "paid back the money I owed him."

[Beancounter]

18 hours ago, sincitymix said:

That is only if you label the transaction as goods or services. 

Duly noted, however, the client makes that decision.  If I want to send it as goods and services I would think the provider would have little say in the matter.  
 

Granted, most people will send as a gift but it’s something to be aware of in case they don’t.  Not here to argue or debate the matter…simply providing information to Forum members. 

[pubic_assistance]

The IRS is hiring 87,000 new agents and arming them with a million dollars worth of guns and fresh ammo.

The basic message is: pay your income tax.

Anyone who receives regular amounts of money on a pay app is not getting "gifts" from his admirers.

Electronic surveillance and meta-data collection is now very proficient. They WILL find you eventually.

These boys need to pay something or risk eventual fines.

[BuffaloKyle]

The implementation of all of this has been pushed back to next year so tax filers and tax agents can have more time to be prepared:

https://www.cnn.com/2022/12/23/investing/irs-delays-threshold-increase-for-business-transactions/index.html

[coriolis888]

On 10/1/2022 at 8:29 PM, sincitymix said:

That is only if you label the transaction as goods or services. 

Please educate me; if you are sending money to a provider, is the payment not for "goods or services"?

To make the matter even more complicated, if the provider is someone you see a lot and pay throughout the year cumulatively $17,000 - you will also have to file a federal gift tax return if you do not label the money for services.  

Edited December 25, 2022 by coriolis888
clarity

[Beancounter]

18 hours ago, coriolis888 said:

Please educate me; if you are sending money to a provider, is the payment not for "goods or services"?

To make the matter even more complicated, if the provider is someone you see a lot and pay throughout the year cumulatively $17,000 - you will also have to file a federal gift tax return if you do not label the money for services.  

I believe the sender has the option to send funds as a “gift”or as “goods and services”.  If sent as “goods and services” and the cumulative yearly amount is $600 or more, a 1099 will be generated for the recipient.  
 

I send my regular guy funds via Zelle which is not subject to these regulations.   
 

You’re correct on the filing of a gift tax return but it’s highly unlikely the person making the gift will have to pay any taxes unless they have exceeded their lifetime exclusion amount which is currently more than $12 million.

[coriolis888]

20 hours ago, Beancounter said:

I believe the sender has the option to send funds as a “gift”or as “goods and services”.  If sent as “goods and services” and the cumulative yearly amount is $600 or more, a 1099 will be generated for the recipient.  
 

I send my regular guy funds via Zelle which is not subject to these regulations.   
 

You’re correct on the filing of a gift tax return but it’s highly unlikely the person making the gift will have to pay any taxes unless they have exceeded their lifetime exclusion amount which is currently more than $12 million.

"I send my regular guy funds via Zelle which is not subject to these regulations."

Zelle is not exempt for reporting amounts paid in excess of $600.00 annually for services rendered.     

I do not want to be the source of bad news, however, if the sender hired the escort for services as most of us do, it would be false to categorize the payment as a gift.   

On the other hand, if the sender files a Form 1099, as would be appropriate, there is expense or work involved for the preparation of the information tax return and the necessity to obtain the true name of the provider as well as his address and social security number.  Not many providers will go along with releasing their private information.    

You are correct in that the sender would not have to pay any gift taxes if the client falsely claims the payments are a gift.   but, if caught by the IRS, the client could face IRS penalties or worse.  

Gift payments exceeding the annual exemption amount need to be reported in a gift tax return but there would be no gift taxes to pay.    

Intentionally calling the escort's payments a gift, both the sender and the escort could be subject to penalties for filing false tax returns. 

In another thread, it was noted that the IRS is hiring  thousands of new IRS agents to increase the number of audits.   This does not give comfort to not being accurate in classifying the payments made to escorts.  

It is good for the escorts that their income is increasing to a point that their income is hirer than it ever was.  The bad part is the tax consequences and possible penalties resulting from not following IRS rules relative to their higher income. 

The rules for filing a Form 1099 are somewhat awkward and complicated.  Even if we pay one escort more than $600.00 in a calendar year, we likely would be excused from filing the Form 1099 depending on facts and circumstances (not paying the escort from a business account).  However, the escort would still need to include the money in his income tax return.

   

 

 

Edited December 26, 2022 by coriolis888

[Beancounter]

https://www.zellepay.com/faq/does-zelle-report-how-much-money-i-receive-irs

According to the Zelle network they do not issue 1099s

[coriolis888]

2 hours ago, Beancounter said:

https://www.zellepay.com/faq/does-zelle-report-how-much-money-i-receive-irs

According to the Zelle network they do not issue 1099s

That is their choice assuming you are not a business account. 

If you are not in business for yourself you do not have to file a Form 1099 for escorts despite the amount being in excess of $600.00 during a calendar year.  This is despite the payments being for services rendered (escorting).  Clearly, the escort must include the income in his tax return.

As I wrote previously, if you see the same escort a lot and pay the escort $17,000 during a calendar year,  you must file a gift tax return if you insist that the payments were gifts rather than payment for services rendered. 

I cannot imagine any IRS agent believing such payments were gifts considering the circumstances. 

The person filing the Form 709 gift tax return could be charged with a crime for aiding and abetting tax evasion by helping the escort misclassify taxable income. 

Do not do it.     

Nonetheless, if an escort receives funds from you and other clients, the escort must file a tax return to report the income earned from escorting.  The escort must pay income tax and self-employment tax on the escort income.  

If the client and escort want to play the unlawful game of calling the income a gift, and if the payments equal $17,000 or more in a year, the person paying the $17M must file a gift tax return even though the payments are not gifts regardless of what each party chooses to call the transfer of money. 

I recommend against calling escort payments, gifts.  

EDIT:

A few posts ahead of this post, forum member @public_assistance posted that the IRS is hiring 87,000 new revenue agents.  That should scare a lot of clients and providers away from playing games in not reporting income or misclassifying income and/or not filing proper tax returns. 

Easy times with the government are coming to an end.

pubic_assistance

• Posted October 2

The IRS is hiring 87,000 new agents and arming them with a million dollars worth of guns and fresh ammo.

The basic message is: pay your income tax.

Anyone who receives regular amounts of money on a pay app is not getting "gifts" from his admirers.

Electronic surveillance and meta-data collection is now very proficient. They WILL find you eventually.

These boys need to pay something or risk eventual fines.

_____________________________________________________________________________________________________

NOTE; THE REPORTS OF 87,000 NEW REVENUE AGENTS HAS BEEN DEBATED BACK AND FORTH AS TRUE THEN BACK TO FALSE.  IN ANY EVENT, THERE IS A LOT OF HIRING BEING DONE AT IRS, THE NUMBER OF AGENTS REMAINS IN CONFUSION:

_____________________________________________________________________________________________________

 

Edited December 26, 2022 by coriolis888

[Kevin Slater]

5 hours ago, coriolis888 said:

Zelle is not exempt for reporting amounts paid in excess of $600.00 annually for services rendered.    

Yes, it is.

5 hours ago, coriolis888 said:

On the other hand, if the sender files a Form 1099, as would be appropriate, there is expense or work involved for the preparation of the information tax return and the necessity to obtain the true name of the provider as well as his address and social security number.

That would only be appropriate if you were hiring him in the course of operating a business.  So long as it's a personal expense, there is indeed no reporting requirement on the client side.

2 hours ago, coriolis888 said:

As I wrote previously, if you see the same escort a lot and pay the escort $17,000 during a calendar year,  you must file a gift tax return if you insist that the payments were gifts rather than payment for services rendered.

It's payment for personal services rendered.  You, the client, have no reporting requirement.  End of story.

Kevin Slater

[coriolis888]

45 minutes ago, Kevin Slater said:

Yes, it is.

That would only be appropriate if you were hiring him in the course of operating a business.  So long as it's a personal expense, there is indeed no reporting requirement on the client side.  The escort would pick up the income without any Form 1099.  

It's payment for personal services rendered.  You, the client, have no reporting requirement.  End of story.

Kevin Slater

 

The way you pieced your answer in parts (like quoting me and answering then quoting me again) makes it awkward to present easily assembled answers and responses to your statements.  

_____________________________________________

I disagree.  We are talking about semantics versus the Internal Revenue Code.  The wording with Zelle is awkward and too lengthy to write out here.

__________________________________________________________________

  5 hours ago, coriolis888 said

:

On the other hand, if the sender files a Form 1099, as would be appropriate, there is expense or work involved for the preparation of the information tax return and the necessity to obtain the true name of the provider as well as his address and social security number.

_________________________________________________

(You) That would only be appropriate if you were hiring him in the course of operating a business.  So long as it's a personal expense, there is indeed no reporting requirement on the client side.

I already discussed this and agree with what you wrote.  Go back and read my post again.

 

_________________________________________________________________________

  2 hours ago, coriolis888 said:

As I wrote previously, if you see the same escort a lot and pay the escort $17,000 during a calendar year,  you must file a gift tax return if you insist that the payments were gifts rather than payment for services rendered.  I already stated that this would be contrary to the Internal Revenue Code.  

___________________________________________________

YOU

It's payment for personal services rendered.  You, the client, have no reporting requirement.  End of story. Not so!

____________________________________________

Go back and read what I wrote.  

I stated that if a game (deception) was being played by either the client or the escort and pretending that the payments were gifts, a gift tax return would be required.  It would be false to claim the payments as gifts when the client is dealing with an escort and getting services.  

There is nothing inaccurate in my response to this matter.  

 

 

 

 

Edited December 26, 2022 by coriolis888

[+ Vegas777]

10 hours ago, Kevin Slater said:

16 hours ago, coriolis888 said:

On the other hand, if the sender files a Form 1099, as would be appropriate, there is expense or work involved for the preparation of the information tax return and the necessity to obtain the true name of the provider as well as his address and social security number.

That would only be appropriate if you were hiring him in the course of operating a business.  So long as it's a personal expense, there is indeed no reporting requirement on the client side.

I was under the impression the reporting requirements for the client applied for hiring independent people, regardless if it's for a client's business or personal use.

For example, if a household hires a person to be a nanny or a weekly housekeeper, the household doing the hiring must file Form 1099.  This does not apply if the household is paying a business who sends the housekeeper or nanny.

To me, hiring a massage or sex provider must follow the same logic.  If the massage or sex provider has a business set up and the client pays the business, then no reporting from the client is required.

[Guest]

14 hours ago, Beancounter said:

https://www.zellepay.com/faq/does-zelle-report-how-much-money-i-receive-irs

According to the Zelle network they do not issue 1099s

Zelle is the mechanism.  The sender bears responsibility for tax documentation 

but, doesn’t 1099 requirement apply to businesses with non employed contractors for now?

Edited December 26, 2022 by BnaC

[Kevin Slater]

4 hours ago, Vegas_nw1982 said:

I was under the impression the reporting requirements for the client applied for hiring independent people, regardless if it's for a client's business or personal use.

For example, if a household hires a person to be a nanny or a weekly housekeeper, the household doing the hiring must file Form 1099.  This does not apply if the household is paying a business who sends the housekeeper or nanny.

To me, hiring a massage or sex provider must follow the same logic.  If the massage or sex provider has a business set up and the client pays the business, then no reporting from the client is required.

You're talking about the nanny tax.  The distinction there is that the nanny is characterized by the IRS as an employee: she works exclusively for one family, they control how her work is performed and set her regular hours.  Independent contractors, however, are not subject to nanny taxes.  You would have to withhold social security and medicare taxes, unemployment insurance, etc. from the nanny's wages, but not so for the gardener (assuming you are one of his several accounts), pool boy or escort, all of whom are independent contractors.

To correct your examples above, you would not issue a 1099 to the weekly housekeeper (again, unless you hired her though your own small business). 

Kevin Slater

[+ DERRIK]

It’s only a matter of time before govco figures it out

Best to address this now

venmo and other apps will get their act together some time 

Edited December 30, 2022 by DERRIK