Policies & IssuesFeb 01, 2022
OSHA Withdraws ‘Vaccine or Testing’ MandatePolicies & IssuesFeb 02, 2022
Jewelers Using Payment Apps Should Know This New Tax Rule
For tax year 2022, the IRS has substantially lowered the threshold for receiving a 1099-K for business transactions made via payment apps.
A new tax reporting rule requires payment app providers to issue a 1099-K if business transactions total more than $600 per year.
New York—Jewelers, designers and service providers using payment apps like Venmo or PayPal should make note of a recent change to a tax reporting rule.
A new IRS tax reporting rule, effective as of Jan. 1, requires payment app providers to issue users and the IRS a form 1099-K if the user’s business transactions total more than $600 per year.
Previously, payment app providers would need to send a 1099-K only if a user had more than 200 business transactions in a year that totaled at least $20,000.
A business transaction means any payment, including tips, for goods and services.
The rule applies to purchases made via a payment app both in store and online, like through Instagram, eBay, Etsy, or any other selling platform.
The rule does not apply to personal transactions, like splitting dinner with a friend or sending birthday money.
App users won’t pay any additional taxes for purchasing goods or services.
Related stories will be right here …
A new IRS tax reporting rule, effective as of Jan. 1, requires payment app providers to issue users and the IRS a form 1099-K if the user’s business transactions total more than $600 per year.
Previously, payment app providers would need to send a 1099-K only if a user had more than 200 business transactions in a year that totaled at least $20,000.
A business transaction means any payment, including tips, for goods and services.
The rule applies to purchases made via a payment app both in store and online, like through Instagram, eBay, Etsy, or any other selling platform.
The rule does not apply to personal transactions, like splitting dinner with a friend or sending birthday money.
App users won’t pay any additional taxes for purchasing goods or services.
The change was signed into law last year as part of the American Rescue Plan, the $1.9 trillion stimulus bill passed, in part, to provide COVID-19 relief, but it also amended parts of the Internal Revenue Code.
The law will apply to tax year 2022, so those eligible for these 1099-Ks will receive them starting in 2023.
The reporting requirement is new, but the tax isn’t.
For this year, individuals are still required to report taxable income received through these platforms on their income tax return.
“Third-party information reporting has been shown to increase voluntary tax compliance and improve collections and assessments within [the] IRS,” said the agency in the FAQ section of its website about the change.
Payment providers like Cash App, PayPal, and Venmo have added updated guidance to their websites.
Payment app Venmo allows users to tag goods and services purchases in its app.
Venmo customers may receive an in-app notification or an email about confirming information for tax purposes.
For example, PayPal and its subsidiary Venmo offer an option for customers to tag their transactions as either a personal one or as a goods and services purchase.
Users are encouraged to select “goods and services” when they are sending someone money to purchase an item. Doing so also makes these transactions eligible for coverage under PayPal and Venmo’s purchase protection program.
In its FAQ section, Venmo noted that customers may receive an in-app notification or email asking them to confirm information they use when filing taxes, like a social security number and address.
Venmo noted that some amounts may be excluded from gross income, and therefore not subject to income tax, like if a user sells a personal item at a loss.
“We encourage customers to speak with a tax professional when reviewing their 1099-K forms to determine whether specific amounts are classified as taxable income,” said Venmo in a statement on its website.
Notably, payments for a good or service made via Zelle, which sends money between U.S. bank accounts, are not subject to this reporting rule.
Zelle would not need to provide a 1099-K because while it facilitates the sending of money between financial institutions, it doesn’t hold that money or participate in settling the funds.
The change to the reporting rule follows the announcement of a plan from the U.S. Treasury to close the “tax gap,” meaning the difference between what the government is owed and what it receives in taxes.
The American Families Plan Tax Compliance agenda, announced in May 2021, aims to raise an additional $700 billion over the next decade through new tax compliance measures.
“These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue,” said the department in its plan.
The treasury found the tax gap was nearly $600 billion in 2019.
“Working to close the tax gap reflects a commitment to ending our two-tiered tax system, one where most American workers pay their full obligations, but high earners who accrue income from opaque sources often do not,” said the treasury.
For more information about changes to tax reporting rules and the 1099-K form, visit the IRS website.
Users are encouraged to select “goods and services” when they are sending someone money to purchase an item. Doing so also makes these transactions eligible for coverage under PayPal and Venmo’s purchase protection program.
In its FAQ section, Venmo noted that customers may receive an in-app notification or email asking them to confirm information they use when filing taxes, like a social security number and address.
Venmo noted that some amounts may be excluded from gross income, and therefore not subject to income tax, like if a user sells a personal item at a loss.
“We encourage customers to speak with a tax professional when reviewing their 1099-K forms to determine whether specific amounts are classified as taxable income,” said Venmo in a statement on its website.
Notably, payments for a good or service made via Zelle, which sends money between U.S. bank accounts, are not subject to this reporting rule.
Zelle would not need to provide a 1099-K because while it facilitates the sending of money between financial institutions, it doesn’t hold that money or participate in settling the funds.
The change to the reporting rule follows the announcement of a plan from the U.S. Treasury to close the “tax gap,” meaning the difference between what the government is owed and what it receives in taxes.
The American Families Plan Tax Compliance agenda, announced in May 2021, aims to raise an additional $700 billion over the next decade through new tax compliance measures.
“These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue,” said the department in its plan.
The treasury found the tax gap was nearly $600 billion in 2019.
“Working to close the tax gap reflects a commitment to ending our two-tiered tax system, one where most American workers pay their full obligations, but high earners who accrue income from opaque sources often do not,” said the treasury.
For more information about changes to tax reporting rules and the 1099-K form, visit the IRS website.
More on Policies & Issues
The Latest
MajorsMay 20, 2024
Studs Opens Luxury Piercing Pop-Up in NYC“Fancy Studs” will feature revamped branding and a new lab-grown diamond fine jewelry collection.
SourcingMay 20, 2024
2 Business-to-Business Platforms Secure Millions in Funding Nivoda and Liquid Diamonds both have big plans for the new capital.
MajorsMay 20, 2024
Stuller Issues New Packaging & Display CatalogThe 2024-2025 edition features new colors and styles, as well as storytelling elements.
Brought to you by
Meet Gemology’s Next Generation Microscope: GIA® Gemolite® NXT Professional EditionGIA®’s most advanced microscope has new features to optimize greater precision and comfort.
SourcingMay 20, 2024
State of the Diamond Industry: Botswana Beyond DiamondsFrom moringa to ecotourism in the Okavango Delta, the country and its leaders are exploring how Botswana can diversify its economy.
Weekly QuizMay 16, 2024
This Week’s QuizTest your jewelry news knowledge by answering these seven questions.
SourcingMay 20, 2024
Anglo American Confirms It Is Looking to Sell De Beers The mining giant also wants to offload its platinum business as part of an overhaul designed to “unlock significant value.”
FinancialsMay 17, 2024
Richemont Appoints Van Cleef & Arpels’ Nicolas Bos as New CEOThe announcement coincided with its full-year results, with growth driven by its jewelry brands.
Brought to you by
Record Gold Prices Have Consumers Undeterred. Here’s Why.Despite the rising prices, consumers continue to seek out the precious metal.
FinancialsMay 17, 2024
Watches of Switzerland’s Fiscal-Year Sales Flat Looking ahead, the retailer said it sees “enormous potential” in Roberto Coin’s ability to boost its branded jewelry business.
Recorded WebinarsMay 17, 2024
Watch: Preparing for Trade Show SuccessJewelry trade show veterans share strategies for engaging buyers, managing your time effectively, and packing the right shoes.
AuctionsMay 17, 2024
Piece of the Week: Cartier’s Ring-Tailed LemurThis little guy’s name is Ricky and he just sold for more than $200,000 at Sotheby’s Geneva jewelry auction.
AuctionsMay 16, 2024
Christie’s Holds 2 Sales Despite CyberattackThough its website has been down for a week, Christie’s proceeded with its jewelry and watch auctions on May 13-14, bringing in nearly $80 million.
AuctionsMay 16, 2024
Sotheby’s Withdraws 101-Carat Yellow Diamond from AuctionDespite the absence of “The Allnatt,” Sotheby’s Geneva jewelry auction totaled $34 million, with 90 percent of lots sold.
ColumnistsMay 16, 2024
The PR Adviser: What the Designer Should’ve DoneLilian Raji gives advice to designers on how to make the most of great publicity opportunities.
SourcingMay 16, 2024
Lucapa to Shed Stake in Lesotho Diamond Mine The mining company wants to divest its 70 percent holding in the Mothae Diamond Mine in an effort to streamline its portfolio.
ColumnistsMay 15, 2024
Squirrel Spotting: Why Retailers Struggle to Fire BrandsWhy do so many jewelers keep lines that are not selling? Peter Smith thinks the answer lies in these two behavioral principles.
AuctionsMay 15, 2024
Red Diamond Breaks Records at Phillips GenevaThe “Argyle Phoenix” sold for more than $4 million at the auction house’s second jewels sale.
Events & AwardsMay 15, 2024
See Who’s in JA’s 2024 ‘20 Under 40’ ClassThe annual list recognizes young professionals making an impact in jewelry retail.
IndependentsMay 15, 2024
David Mann Jewelers in Upstate NY to Close After 35 YearsOwner David Mann is heading into retirement.
FinancialsMay 15, 2024
Brilliant Earth’s Sales Fall Flat in Q1 While overall sales were sluggish, the retailer said its non-bridal fine jewelry was a popular choice for Valentine’s Day.
AuctionsMay 14, 2024
2 Huge Yellow Diamonds Are Heading to AuctionChristie's is selling one of the diamonds, moving forward with its Geneva jewelry auction despite the cyberattack that took down its website.
MajorsMay 14, 2024
Platinum Born Taps ‘Born Leaders’ for New CampaignThe ad aims to position platinum jewelry as ideal for everyday wear.
GradingMay 14, 2024
Instappraise Adds Trifold Brochure to Appraisal OfferingsRetailers can customize and print the appraisal brochures from their store.
Lab-GrownMay 13, 2024
Lab-Grown Diamond Brand Lightbox Cuts Prices by 25 to 40%The move follows a price-drop test run in Q4 and comes with the addition of a “quality assurance card” from GIA for some loose diamonds.
TechnologyMay 13, 2024
Christie’s Website Brought Down by Hackers, Watch Auction Postponed The site has been down since Thursday evening, just ahead of its spring auctions.
AuctionsMay 13, 2024
Madeleine Albright’s Jewelry, Pins a White-Glove Sale at Freeman’s | HindmanThe late former U.S. Secretary’s collection went for quadruple the sale’s pre-sale estimate.
IndependentsMay 13, 2024
Zachary’s Jewelers Names Mother’s Day Jewelry Contest WinnersThree fifth graders’ winning designs were turned into custom jewelry pieces in time for Mother’s Day.
