For many businesses in Godfrey and throughout Illinois, the methods in which they are paid for their goods and services have changed dramatically in recent years. Whereas in the past, people paid using cash, checks or credit cards, the new template includes third-party online payment entities. Some use this exclusively. That includes PayPal, Venmo and others. Given the way purchases are made and business is done in today’s ever-advancing world, this was a necessity. There is a certain level of convenience in getting paid in this way. Still, it can be confusing, especially with new rules put in effect. Understanding those new rules is imperative to try and avoid problems with the Internal Revenue Service. This is especially important even if the rule related to payment apps and businesses will not start until 2023.
New rules started on New Year’s Day
If a business is using these apps to receive payments, the IRS instituted a new rule at the start of 2022 that should be understood. First, it should be clear that there are no new taxes that must be paid. However, if anyone is trying to shield income for what they previously owed by using these apps, it can be problematic. When a payment app is used, the provider will send a form to the IRS and the business related to it if the amount surpassed $600 for the year. This is new. Previously, the form – 1099-K – was only sent if a business surpassed 200 transactions for the year and the total was a minimum of $20,000.
This includes goods, services and tips. It is only business-related, so people who were sharing the cost for a night out need not worry about this new rule. These forms will be sent out for 2023. Despite that, it is a good idea for businesses to be fully prepared for that by tracking what they are earning through cash apps now. Payment apps are taking part by adding information to their sites and helping customers track what they are earning and whether it is a business payment or personal payment. People who have a side business will undoubtedly be impacted by this if their earnings go past the threshold. This is specifically for third-party payments and it is noted that Zelle – which shifts money via bank accounts – is not included.
Businesses should be prepared for new tax laws and rules well in advance
Tax law can be complicated and confusing for seasoned business owners and new business owners alike. One of the last things any business owner wants is to receive notification from the IRS that there is a problem with the tax return. An audit can cause worry and lead to major financial and practical ramifications. This type of scrutiny is challenging in myriad ways and it is important to be aware of changing trends as they come up. That includes being fully aware of new rules that might have gone into effect without many business owners being cognizant of them.