There’s A New Tax Rule For US Small Business Owners. What To Make Of It?

A new tax rule will impact millions of small businesses in 2022. You can thank one small change buried in the American Rescue Plan Act of 2021, The Guardian reports.

Let’s suppose you’re a small business owner or freelancer, and you get paid from a digital payment service like PayPal, Venmo, Zelle, Cash App or any third-party settlement provider that’s accepting credit cards on your behalf and putting money into your bank account. If those payments were for goods and services that you sold to customers, it was previously up to you to make sure you were reporting that income on your tax return. But now, beginning in 2022, if you receive more than $600 in total during the course of the year – regardless of how many customers are paying – your payment service is required to report that amount to the IRS.

Let’s be clear: you should be reporting those amounts as income anyway. But the reality is there are 30 million small businesses, freelancers, solo-preneurs and independent contractors in the US and – if my client base is any indication – many of them who receive a number of small payments from many customers throughout the year may, well, forget. Particularly if – as is often the case – there are many small transactions or their record keeping is sub-par. But no worries! The IRS will now be able to find out what you earned anyway.

This means that whether you’re selling products or services on Amazon, Etsy , eBay or at craft shows or just face-to-face, you can now expect to receive a 1099-K form – after 31 January 2023 – from the payment services that you’re using of the revenue they reported on your behalf to the IRS for the purchases of goods and services made in 2022. How do these services know that the purchases were made for goods and services and not just a payment from a friend or family member? Most of them are adding an extra form during the payment process for the payer to identify the nature of the payment. Read more at The Guardian.

{Matzav.com}