There’s been alot of talk (and fear) about the new reporting standards for third-party payment apps like CashApp and Paypal. Last year, changes to taw law were put into effect in the American Rescue Plan, which became effective January 1, 2022.

These changes are governed by new IRS reporting standards and taxation on certain transactions performed via third-party payment processors, when they reach a total of $600. However, this threshold and the new requirement applies to commercial transactions only. So, if you use CashApp, Venmo, Zelle or Paypal like most do, to send money for rent, bills, movies, or other everyday actions — for personal use — fear not.

Now, if you’re a business owner, effective January 1, 2022, once your transactions reach $600, the IRS will be taxing you on these transactions. How will they know? Because these processors have your Social Security number and/or related EIN, identifying you and your business. Small business owners, independent contractors and those with a side gig — the number of individuals which exploded exponentially since the Pandemic — should know that your total reported to the IRS. This new law also changes the previous threshold of $20,000 and 200 transactions, to the $600 regardless of the amount of transactions.

So, whether you’re an Uber driver, contractor for Amazon, have an Etsy Shop or Ebay Store, or other types of self-employment, these changes apply to you. If you haven’t already, it’s really important that you have a separate CashApp or other app, for personal use and for business use. Even better, separate bank accounts for personal and business use. This way, it’s much easier to substantiate any claims you may make were your questioned by the IRS about these transactions. Again, the new changes went into effective January 1, 2022. Your tax obligation will be reflected in your 2022 tax return.

In 2023, you will receive a 1099-K form from the respective apps for these payment platforms. A copy is simultaneously sent to the IRS, as required. If you file a return that reports income different than, or lacking, income that has been reported on your behalf, you’ll likely be contacted by the IRS for clarification and correction. Smaller amounts are not likely to trigger further action, but when the income disparities are significant, you may face an audit. Another reason why documentation is a best practice.