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FACT BRIEF

Are personal payments on systems like Cash App and PayPal under a "tax rule" for transactions over $600?

By Christiana Dillard
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NO

Contrary to a social media post, no "$600 tax rule" exists — only a reporting adjustment for business transactions.

Although the American Rescue Plan Act of 2021 changed the reporting requirements for transactions that take place through peer-to-peer payment systems, tax experts told Lead Stories that the provision is only for qualifying business transactions, which already were taxable.

The social media post conflates third-party network transactions — which are business or "commercial" transactions — with personal transactions like gifts and donations.

Steven Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center, told Lead Stories that while the scope of what counts as "commercial transactions" can be murky, peer-to-peer payment systems usually offer the option for users to register for a business account. This option helps payment systems identify which users should receive a specific form, Form 1099-K, from the IRS.

See a full discussion of this at Lead Stories
This fact brief is responsive to conversations such as this one.
Sources
Internal Revenue Service About Form 1099-K, Payment Card and Third Party Network Transactions
The Joint Committee on Taxation Technical Explanation of Section 9674 of H.R. 1319, the “American Rescue Plan Act of 2021.” (March 01, 2021)
ABOUT THE CONTRIBUTOR
Lead Stories
Lead Stories is a fact checking and debunking website at the intersection of big data and journalism that launched in 2015. It scouts for trending stories, images, videos and posts that contain false information in order to fact check them as quickly as possible. It actively monitors the fake-news ecosystem and doesn’t wait for reader tips or reports before getting started on a story.
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About fact briefs published on Gigafact
Fact briefs are short, credibly sourced summaries that offer “yes/no” answers in response to claims found online. They rely on publicly available, often primary source data and documents. Fact briefs are created by contributors to Gigafact —a nonprofit project looking to expand participation in fact-checking and protect the democratic process. See all fact briefs here.