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Wednesday, Jan. 5, 2022

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

Christiana Dillard, Lead Stories

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.

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