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.
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.
The IRS will look into the digital payment service accounts of small businesses, freelancers, and independent contractors. Please honestly declare your income, the IRS will now be able to find out what you earned anyway.