The P2P (peer-to-peer) payment apps have soared in popularity in recent years. With players like Venmo, PayPal ( (PYPL) – Get PayPal Holdings, Inc. Report), Apple Pay ( (AAPL) – Get Apple Inc. Report), Tencent ( (TCTZF) ) (and so many more) some experts say the market will grow another 20% in 2022.
With the increase in this mobile payment app use, it’s no surprise that the IRS has taken a closer look at these transactions. Some, are taxable. Which ones? How do you report it? And are there tax forms needed for these transactions?
TheStreet’s Tracy Byrnes spoke with Lisa Greene-Lewis, CPA and expert for TurboTax. Watch the video above for tips and a guide to the 1099-k form.
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Video Transcript:Tracy Byrnes: Lots of people using third-party payers these days– PayPal, Venmo, all these cash apps out there. So what are the tax rules surrounding all this? And what’s this 1099-K form that you got in the mail? Lisa Greene-Lewis, CPA and TurboTax expert, is here to explain all of it. OK, so first of all, what’s this 1099-K?
Lisa Greene-Lewis: So a 1099-K is a form that third-party providers issue to you if you’ve had 200 transactions and made $20,000 that has been processed through them. So the change in the reporting rules is going to come in the tax year 2022, and it’s going to go down substantially. They’re going to be reporting if you’ve made $600 or more that was processed through them.
Tracy Byrnes: So in 2022, $600 or more will be reported.
Lisa Greene-Lewis: Right.
Tracy Byrnes: That is crazy, and that’s going to affect a lot of people. So, obviously, small businesses, but who exactly does this impact?
Lisa Greene-Lewis: Yes, so this new reporting rule, it impacts self-employed or business owners that use those third-party providers. I know a lot of people– there are so many questions out there. They’re wondering, oh, if I pay my friend through Venmo for dinner, or if I pay my kids, send money to them through Venmo or PayPal, am I going to get a form? But it’s really for self-employed business owners.
Tracy Byrnes: If I’m a self-employed person, though, Lisa, sometimes money comes in. Money comes out. It’s so hard to keep track. What should I do?
Lisa Greene-Lewis: Yes, so have you used TurboTax Self-Employed, it will ask you specific questions about you and your business and give you the business deductions that you’re eligible for. And then it also searches for industry-specific deductions. I know there are so many new industries out there. So it uses machine learning and AI, and it gets smarter, and it learns industries and serves up these specific deductions directly related to your business. So don’t forget about those deductions related to your business. They can offset that income that’s reported on the 1099-K.
Tracy Byrnes: Right, so you can at least bring your tax bill down.
Lisa Greene-Lewis, thank you for explaining it all.
Lisa Greene-Lewis: Thank you for having me.
Editor’s note: Video produced by TheStreet’s Zach Faulds