Beginning January 1, 2022, these companies (and others like it) were required to report to the Internal Revenue Service
Want to avoid an IRS audit? As Bloomberg reported last week, starting this tax year (2022), the IRS is creeping on the Venmo and PayPal accounts of millions of taxpayers. Do you flip treasures you find at garage sales on eBay? Do you train people at your local gym? Do you manage a fantasy football league? A lot of “side hustles” and hobbies are about to be totally exposed to the IRS.
Is it taxable?
Now, just because you received $100 from a friend on Venmo does not mean you have to pay taxes on this money. Facts and circumstances matter. But, you should be organized, and be prepared for the IRS to ask for details on each Venmo transaction. The Bloomberg article linked above provides a perfect example of why this is important.
“Lexi, who asked that her last name not be disclosed because she fears an IRS audit, spends her weekends trolling flea markets, estate sales, and storage unit auctions for hidden treasures such as vintage sunglasses and Nintendo Game Boys. Since 2013 she’s sold those items as well as her old clothes and housewares on EBay, Facebook Marketplace, and Depop, earning as much as $15,000 a year. And because those companies didn’t say anything to the IRS, well … she didn’t, either. But under the new regulations, if she raids her closet for a vintage dress to sell for $45, that $45 will be considered taxable income unless she can provide the original receipt proving she’s selling it at a loss. “I’m just constantly cleaning out my house,” she says. “The new rule means I’ll have to track everything.””“The IRS Is Coming for Your Venmo Income” by Arianne Cohen
Maintain your records.
Keep an electronic and/or offline log of all Venmo, PayPal, Facebook, or other virtual transactions.
Here are just a few of the questions you should be prepared to answer:
- What was the reason you received the payment?
- Was the payment for goods and/or services?
- Was the payment reimbursement for a cash loan? Do you have evidence to prove it?
- Did you incur any expenses in the process of transacting for said goods and/or services
Stay ahead of the IRS
Contact us today if you have concerns about this topic or any IRS related problem. When dealing with the IRS, it’s best to be proactive, rather than reactive.