$600/year additional tax reporting and what it means for a non-LLC team owner?

[ETR]

First things first, I'm no expert on this stuff.  I'm also not very political and it would be nice to keep that out of this as well.

 

So now there's a $600/year threshold for additional reporting of electronic payments via a 1099-K.  Not necessarily additional taxes, but now our electronic payments between drivers and team owners will come into view.  That's my limited understanding of it.  I am not an LLC, certainly don't profit, and my drivers are my friends simply paying their share via paypal.  

 

Any advice on how to ensure I keep on the up and up?  Don't worry because it doesn't really apply?  Before anyone suggests cash, that's not ideal with non-local drivers.

 

Thanks

[Chris Huggins]

I don't think it applies to "personal transactions"

 

In my non-accountant take on the issue, it has really gotten blown out of proportions by the news.  If you have an LLC, you were already required to report business income transactions regardless of the amount.  I did not exceed 20k or 200 transactions on paypal, but I was still supposed to include that as income on my business accounting sheet and report that as personal income.

 

For my personal paypal where my friends paid me back for split costs of meals, fun events, etc (I.e. not for goods or services), those do not need to be reported as income.

 

My take is that this change will help the IRS "crack" down on some smaller companies who were using the lack of accountability via reporting to not claim income as they were supposed to be doing already. 

 

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Keep in mind, however, that personal transactions (e.g., personal payments to friends and family) on the payment networks including Venmo, PayPal, etc., are not considered "payments for goods and services." That's important because the1099-K third-party payment network reporting rule applies to payments made for goods and services. It doesn't apply to payments made through the payment networks that were gifts, or other personal payments of money to family and friends.

For example, if you received payment through a personal Cash App account during the year, those transactions won’t be reported on a 1099-K. In this example, that personal Cash App account is designed for noncommercial use, like sending a friend money because you’re splitting the cost of a meal. But if you have a Cash for Business account with Cash App(opens in new tab), and your transactions exceed the $20,000/200 transaction tax reporting threshold last year, you should have received a 1099-K earlier this year to file with your federal return.

 

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The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.