IRS Changing Rules on Online Third Party Processors like Venmo

(KNSI) – Online payments will see rules shift dramatically as far as how they are reported to the Internal Revenue Service.

Saint Could State University Associate Professor of Accounting Peter Fuchsteiner says third-party processors, like Venmo, will need to provide a 1099 form to clients that use its service if total transactions are above $600 starting next year. For now, the rules are significantly more relaxed.

“The IRS rules for 2022 is the third party vendor, Venmo, doesn’t need to send a 1099 to the taxpayer and the IRS unless the transactions exceed $20,000 in gross payments during the year, and there are over 200 separate transactions.”

The rule was initially meant to take effect for returns due by this April, but the IRS allowed a transition year. All income must be reported, but many users fail to do so on their own for cash transactions like at craft and vendor shows.

In another shift, pandemic-era benefits embedded in the tax code are reverting to normal. Fuchsteiner says you will see a significant difference when it comes to the child tax credit.

“2021, you could be up to $3,600 in refundable per child under 17. Now, it’s down to $2,000 and only $1,500 is refundable.”

The child tax credit is available for an individual making less than $200,000 per year or below $400,000 for a couple filing jointly. Fuchsteiner expects the change to affect a significant number of people.

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