Phoenix

Could we soon owe taxes on Venmo funds?

PHOENIX — This is why it is necessary to double-check the knowledge in Facebook posts and on social media — as a result of generally the knowledge is misunderstood or outright unsuitable.

A collection of posts on Facebook not too long ago started circulating that urged the Biden Administration was seeking to tax funds made on web platforms, like Venmo, PayPal, and Cash App, that was greater than $600.

However, that’s not essentially right.

“What the debate is about is a proposal to increase the amount of information the IRS can get. It’s not about changing whether or not something is subject to tax or not,” mentioned Erin Scharf, an assistant professor of regulation at ASU’s Sandra Day O’Connor School of Law.

She mentioned most individuals pay their taxes truthfully as a result of employers report their earnings to the IRS on an staff’ W-2 kinds.

The latest Biden Administration proposal – and it is solely a proposal – is aimed toward monitoring the earnings that is not reported by employers, which the IRS quantities to $166 billion {dollars} in lost tax income every year.

At essentially the most fundamental stage, the proposal calls in your financial institution and different platforms you utilize, like Venmo, PayPal, or Cash App, to create a report that’s despatched to the IRS each year that exhibits “inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner.”

What isn’t clear is how the IRS would use this data when we all file our taxes.

For instance, when you break up lease with a roommate and use an app to pay, would that trigger a pink flag or set off an audit for the roommate who’s receiving the money?

Scharf mentioned it might work as a W-2, holding folks accountable for the earnings taxes they legally owe not creating new ones.

“If you earn income, because you’re being compensated for services, or you’re selling property, and that property is being sold at a gain to you, that’s income,” mentioned Scharf. one thing you might be legally accountable to pay irrespective of the way you obtain the money or which platform you utilize.

She mentioned splitting lease isn’t earnings, it is a shared expense, which implies it can’t be taxed.

Again, it could solely affect funds of $600 or extra — and at this level, it’s merely a proposal. A whole lot of the precise logistics haven’t been introduced but.

You can learn the complete proposal, together with the opposite tax income proposals, at https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf (web page 94 for the tax proposal).

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