Third Party Payment Companies and New IRS Guidelines For Payments Over $600

Linda Glein on

Most of our members deposit directly to the brokerage account. Even those who make out paper checks make them out to the brokerage.(The Treasurer can either mail them in or do a mobile photo deposit)

I see potential trouble if money is deposited into an individual's checking account before it is sent to the brokerage.

Linda

On Tue, Dec 7, 2021 at 6:29 PM Chevelle A. Williams via bivio.com <user*39109700001@bivio.com> wrote:

Hello,
I hope everyone is doing well. In our club, we use Venmo to send the treasurer our monthly contributions for her to deposit in the investment account. A new guidance came out that states for goods/services over $600, the payment company will send the info to the IRS. Even though it states "goods/services", it doesn't state how they will differentiate it from something else. We don't want to put our treasurer in a position where she is being sent additional 1099 because they think she has a business. The only alternative option,we can think of, is to just start mailing her checks. Are any other clubs concerned or will be effected by this new guidance? If so, what changes are you going to make or are you not that concerned. Thanks for your input and have a good night. Chevelle

ira smilovitz on

Venmo isn't jumping the gun. The new regulations take effect on January 1, 2022. Payment processors are requesting W-9s now so they don't get caught short at the end of the year when they need the information.

The 1099-K which may be issued by Venmo doesn't correlate to any number on any tax return. In fact, it is useless for just about any purpose other than flagging entities which may have large electronic cash movements and aren't reporting "some" level of taxable activity.

The tax professional organizations (NAEA, and I believe AICPA and other smaller associations) have been in constant dialog with the IRS and Congress (who is responsible for this change) to highlight the deficiencies in the 1099-K reporting system. It only reports "forward" transactions and doesn't net out returns, credits, or cash-back transactions. It doesn't distinguish between business and personal transactions where they can be mixed. It doesn't address non-income and "trust fund" transactions such as tips and sales tax.

Bottom line - I wouldn't worry about receiving a 1099-K.

Ira Smilovitz, EA

On Tue, Dec 7, 2021 at 11:23 PM Linda Glein via bivio.com <user*21345500001@bivio.com> wrote:

Most of our members deposit directly to the brokerage account. Even those who make out paper checks make them out to the brokerage.(The Treasurer can either mail them in or do a mobile photo deposit)
I see potential trouble if money is deposited into an individual's checking account before it is sent to the brokerage.

Linda

On Tue, Dec 7, 2021 at 6:29 PM Chevelle A. Williams via bivio.com <user*39109700001@bivio.com> wrote:
Hello,
I hope everyone is doing well. In our club, we use Venmo to send the treasurer our monthly contributions for her to deposit in the investment account. A new guidance came out that states for goods/services over $600, the payment company will send the info to the IRS. Even though it states "goods/services", it doesn't state how they will differentiate it from something else. We don't want to put our treasurer in a position where she is being sent additional 1099 because they think she has a business. The only alternative option,we can think of, is to just start mailing her checks. Are any other clubs concerned or will be effected by this new guidance? If so, what changes are you going to make or are you not that concerned. Thanks for your input and have a good night. Chevelle

Chevelle A. Williams on

Good morning,
Thanks to everyone for your quick responses and additional info about this new guidance! I appreciate it.

I will definitely look into these options.

Have a great week,
Chevelle

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