Are you a child caregiver who receives money from parents who use paid software like Venmo, Zelle, or Cash App? If so, there is a new IRS law that could affect you.
From 2022, these paid programs will send you a Form 1099-K if you collected $ 600 or more from all parents using these programs in 2022. You will receive a Form 1099-K in January 2023.
What does this mean?
You will not be able to borrow any more taxes.
You should always report all the money you receive from the parents who signed up for your program. The new law does not change that. You do not have to pay much tax because of this law as long as you mention parenting payments as money.
The new law aims to reduce the tax fraud perpetrated by small businesses that may not have disclosed all of their previous earnings.
If you use one of these paid apps, they may start asking for more information such as the Employer Identification Number (EIN) or the Social Security number. All providers must obtain their EIN to avoid giving out your Social Security number.
If you use one of these paid apps to purchase items for personal use, you will not receive a Form 1099-K. In order for your business profile to be different, you may need to set up a variety of programs, one for business and the other for personal use.
Let’s look at an example of how this works. Suppose by the end of 2022 you have received $ 35,000 in parental fines and check or cash and you have also received $ 10,000 through Venmo. You will receive a Form 1099-K from Venmo stating that you have received $ 10,000. The IRS also received a copy of this form. This will notify the IRS that you have received the money and they can monitor it if they are reviewing your tax returns.
You have to claim $ 45,000 in total as a refund for your tax return. If you are a self-employed person, you may want to enter $ 10,000 on line 6 (Other Income) on List C instead of earning it with the rest of the money in line 1.
In the end, the new law is not big. As long as you report all of your income on your tax returns, including payments received from these paying programs, there is nothing to worry about.
Tom Copeland – www.tomcopelandblog.com
Categories: Parents & Taxes, Archives & Taxes