Apps Now Required to Report Business Payments Exceeding $600 Annually

  • Payment apps are now required to report business transactions that exceed $600 annually.
  • The new tax rule underscores one of the biggest advantages that governments see with digital payments: traceability. 
  • Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry. Learn more about becoming a client.

The news: Effective January 1, 2022, payment apps like PayPal, Venmo, and 

Cash App

 are required to report users’ business payments that exceed $600 in a calendar year to the Internal Revenue Service (IRS), per NBC News.

P2P mobile payment transaction volume will reach $785.19 billion in 2021

P2P mobile payment transaction volume will reach $785.19 billion in 2021.

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Providers need to give business owners a 1099-K tax form that breaks down commercial income received through the app if it meets the $600 threshold.

1099-K forms were previously only required for merchants with more than 200 transactions in a year exceeding $20,000 in total value. The updated rule won’t affect users until the 2022 tax filing cycle, which takes place in 2023.

Gift payments, transactions from selling personal items at a loss, and payments sent as reimbursements are excluded from the rule.

What this means: The updated rule won’t affect payment apps from a profitability standpoint—it just makes them provide tax documentation for more business users.

Business owners’ tax liabilities remain unchanged: They’ve always had to report business income regardless of what channel it came through.

It might be easier for merchants that use these apps to report that income now—primarily small businesses that fell short of the $20,000 1099-K threshold and may have had a harder time consolidating transactions themselves.

The opportunity: Players like PayPal and Cash App could use the new tax rule to their advantage by creating payment-adjacent tax services that help limit the friction some small businesses face during tax season—like Stripe’s tax offering.

Block already offers a free tax filing service through Cash App, but it could expand the offering to include fee-based products. Such value-added services could help boost revenues for peer-to-peer (P2P) payment providers as they work to bring in business users.

The bigger picture: The new tax rule underscores one of the biggest advantages that governments see with digital payments: traceability. Unlike cash payments, digital transactions can easily be tracked—and, in turn, easily taxed. By updating digital payment tax rules, governments can mitigate tax evasion.

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