Wednesday, Jan. 5, 2022
Are personal payments on systems like Cash App and PayPal under a “tax rule” for transactions over $600?
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.
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)
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Fact briefs are bite-sized, well-sourced explanations that offer clear "yes" or "no" answers to questions, confusions, and unsupported claims circulating online. They rely on publicly available data and documents, often from the original source. Fact briefs are written and published by Gigafact contributor publications.
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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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