IRS Issues Tax Documents For Side Hustles Transactions Over $600

IRS Issues Tax Documents For Side Hustles Transactions Over $600

Beginning this month, online business owners who sell their goods and services through sites like Venmo, Etsy, and Airbnb will be sent tax forms if they have received payments of more than $600. Recently, tech companies have notified users of the impending changes and asked them to submit tax information, reports The Washington Post.

“Until this year, the threshold was much higher ($20,000 and 200 transactions), so it didn’t affect nearly as many people,” Venmo said in a message to its users. “This requirement only pertains to payments received for sales of goods and services and does not apply to friends and family payments.”

The new modifications to conduct business online triggered a collective outcry on social media. The once low threshold allowed Americans to jump into entrepreneurship; 5.4 million people started their businesses last year, according to the data reported by the U.S. Census Bureau last week, the Washington Post reports.

The changes directly conflict with President Joe Biden’s promise to tax wealthier Americans.

“Maybe it’s a boon to the IRS, but it’s not coming from the billionaires — it’s coming from the smaller businesses,” Sandra O’Neill, a tax attorney, and partner at Bowditch & Dewey, said in an interview with Bloomberg. “It’s much harder to go after the billionaires. It’s much harder to go after Amazon. If you have someone who makes a mistake — a small business — it’s very easy to go after them.”

Apps, marketplaces, and payment providers reported payments to the IRS for users that received more than 200 transactions, totaling over $20,000 in value in a particular year. The new $600 baseline that transpired last year is part of the American Rescue Plan that the White House announced to issue relief to small businesses affected by the pandemic.

As a result of COVID-19, service providers like hairstylists became self-employed rather than work for commissions in established salons. They relied on PayPal Holdings Inc.’s Venmo and Block Inc.’s Cash App to accept payments, said Mary Rector, chief executive officer of the hairstyling community Behind the Chair.

“This adds insult to injury, knowing how long they were shut down for and how much income they lost,” said Rector, whose group says it includes 10 million hairdressers around the world. “These people went out on their own, they started to do house calls, they started to rent chairs — that’s why Venmo became such a big deal.”

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