8 ms·

Note that it's commercial transactions, not your friends & family payments: "Starting Jan. 1, the IRS said, if a person accrues more than $600 annually in comm

by pavlov 5y ago

Note that it's commercial transactions, not your friends & family payments: "Starting Jan. 1, the IRS said, if a person accrues more than $600 annually in commercial payments on an app like Venmo, then Venmo “must file and furnish a Form 1099-K” for them — reporting on all the commercial income they collected through the app. "The tax-reporting change only applies to charges for commercial goods or services, not personal charges to friends and family, like splitting a dinner bill."

bitxbitxbitcoin 5y ago
That means we will have to see how hard they crack down on f&f payments which are default in certain trading circles with a separate reputation system to manage fraud.
sethhochberg 5y ago
I try not to be cynical about news coverage, but its so difficult when I see headlines like this that could be so much more clear by simply adding the word "commercial"... several friends have been outraged about changes to how they split monthly expenses with roommates, partners, etc before discovering the reality of the situation - seemingly all because the reporting on it has just been _bad_.
- colpabar 5y ago
  > several friends have been outraged I don't know if you can even call it cynicism anymore. You just understand the news media business model. Outrageous headline -> more clicks -> more ad revenue. There would simply be less revenue if your friends only had to read one article to get the full picture.
- reaperducer 5y ago
  Part of the problem is bad headlines. A larger part of the problem is the fact that when people get their news from social media, they read only the headlines and don't bother with the story. Somehow people have become convinced that reading a stream of half-sentence headlines is the same thing as being informed about current events.
- seibelj 5y ago
  But how will venmo know what is commercial vs. paying rent? If you can mark it as rent and they won’t report, then merchants will just mark everything in such ways. In practice Venmo will just report everything for safety.
  - ziml77 5y ago
    It's up to you to the both parties to ensure that the payment is marked correctly. And services like Paypal already have a reason to kick people off who aren't choosing the right transaction type. Paypal doesn't take a fee from friends & family and other gift payments, so it's already in their best interest to find who's abusing it. Also I can't imagine the platform would be liable if they are not the direct cause of misreported transactions.
  - ketzo 5y ago
    Venmo is already trying to solve this by incentivizing users to flag payments themselves. When you go to pay someone, there's a pretty big box on the screen that says "Are you paying for goods or services? Protect your purchase here" with a little toggle button, and an explanation that the seller will pay a fee in return for you being able to get a refund.
  - pests 5y ago
    It's not up to Venmo to report. They are just providing extra information to the IRS to cross check. Even if you mark it as such in-app; as a business you still have a legal duty to correctly report the income your business made. Not doing so is already illegal. This just helps the IRS catch this type of fruad easier. There's no extra taxes or anything - the $600 or more is taxed when reported correctly (as it was before this change, and how amounts under $600 are taxed as well - business income).
voakbasda 5y ago
The fun here stems from the fact that many small business owners use the friend-to-friend side of these payment services. These services either will be cracking down on business use of those accounts (and thus push people off their platform), or they will be forced to report all transactions across all accounts.
- MattGaiser 5y ago
  The services don't seem too concerned about small businesses abusing the friend to friend options for their own purposes, so I can easily see it being the latter.
  - ketzo 5y ago
    Venmo, at least, is absolutely concerned about it. The app really tries to get you to flag payments as "business" any time you're paying someone.
    - voakbasda 5y ago
      If you pay someone as a business, they eat the transaction fees. If they have you pay as a “friend”, then the customer pays additional fees, increasing the total cost of the transaction. Any business doing that is breaking the terms of use. I can imagine it only a matter of time until they start suspending customer accounts for not flagging such transactions.
- reaperducer 5y ago
  The fun here stems from the fact that many small business owners use the friend-to-friend side of these payment services. Unpopular opinion, but I'm OK with eliminating this loophole. I went to a record shop a couple of weeks ago and when I went to pay, the guy didn't take Apple Pay. Or any kind of credit card. All he took was Venmo and Facebook. Fortunately, I had cash. But if you can't even shell out $5 for a Square reader to take credit cards, you're not a business — you're a hobby. And yes, I have owned small businesses before. Three times. Each time, I took credit cards as payment. It's known as "cost of doing business." No different than paying to put up a sign, or renting a storefront.
atlantas 5y ago
BitwiseFool 5y ago
>"Note that it's commercial transactions, not your friends & family payments" For now. Once established it will be trivially easy to make this apply to all payments.
- pythonaut_16 5y ago
  This is asinine. If the government wants to tax all transactions you make they'll tax all transactions you make. This doesn't make that any easier. This is the government adding reporting requirements for transactions that are already taxable. It's just covering a gap where transactions weren't being reported.
  - BitwiseFool 5y ago
    You can manually specify the type of transaction through Paypal as either commercial or personal. If these payment processors are building an infrastructure to report commercial payments, I posit they can re-use the code for personal transactions as well. It might be as simple as changing a few boolean flags. Realistically, a few years from now Janet Yellen will testify before congress that people are laundering money by flagging transactions as personal rather than commercial and that the Treasury has the authority to require Venmo, PayPal, and Zelle to report all transactions in order to go after tax evaders and people not paying their fair share. To calm any outrage, maybe they'll raise the threshold to $1,000 as a conciliatory measure.
    - pythonaut_16 5y ago
      From a code/business standpoint this absolutely makes things easier to report on personal transactions. My point was the thing stopping Venmo from reporting on your personal transactions is not technical. As soon as the government tells them they need to report, they will comply. Your second point is possible, but I don't see how this move really gets us closer to that, other than providing data that could be used to make the argument. How is this different than the transition to requiring online transactions to charge sales tax?
thepasswordis 5y ago
Ah, cool cool, so when the IRS accuses you of committing tax fraud because you have $12,000 of undeclared "income" due to your roomate venmoing you their half of the rent, you just have to simply prove to the IRS that you aren't a criminal!
- oh_sigh 5y ago
  Should be fairly easy to show monthly payments in the value of half rent between your roommate and you.
  - heyparkerj 5y ago
    "Fairly easy" is never language I would use to describe showing/proving anything to the IRS
  - LorenPechtel 5y ago
    Proving things to the IRS is hard. Let's go back to the stone age--the 1980s. IRS to my mother: You didn't report your income from XXXX on your tax return. Mother to IRS: I've never even heard of XXXX let alone worked for them. I'm retired. IRS to mother: If you believe the 1099 is wrong talk to the company to get them to fix it. Mother to IRS: I have been unable to even locate XXXX, please provide me with contact info. IRS to mother: We are not allowed to give out such information. I was off at college at that point and don't know how the situation was finally resolved. When I got a bad 1099 my former employer even sent out a letter explaining the problem (a bogus entry had made it onto all of our 1099s) and how to dispute it with the IRS but in that case they weren't going to be contesting it--the company had already gone under. I'm pretty sure my mother's case was an illegal with a forged SS card who used my mother's information--the company would contest a dispute over a 1099 because by their records it was correct.
    - throwawayboise 5y ago
      I've never had a problem ultimately resolving errors by the IRS. I'm sure that's not universally true, and it does take forever. Respond immediately if you are notified of an issue. If you are actively working to resolve the issue that will help avoid getting in a situation where wages are garnished or liens issued. Do everything in writing, sent by registered postal mail. Nothing they tell you over the phone is official. Keep copies of everything related to the issue forever.
csomar 5y ago
You have to be quite gullible to fall for that. If the government were to rely on people honesty, then why do this in the first place? If you were to mark these transactions, then you'd also include them in your tax return. This is just to get their foot in the door. Once it's there, it's much easier to expand the surveillance activity.

by pavlov 5y ago

bitxbitxbitcoin 5y ago

That means we will have to see how hard they crack down on f&f payments which are default in certain trading circles with a separate reputation system to manage fraud.

sethhochberg 5y ago

I try not to be cynical about news coverage, but its so difficult when I see headlines like this that could be so much more clear by simply adding the word "commercial"... several friends have been outraged about changes to how they split monthly expenses with roommates, partners, etc before discovering the reality of the situation - seemingly all because the reporting on it has just been _bad_.

colpabar 5y ago
> several friends have been outraged I don't know if you can even call it cynicism anymore. You just understand the news media business model. Outrageous headline -> more clicks -> more ad revenue. There would simply be less revenue if your friends only had to read one article to get the full picture.
reaperducer 5y ago
Part of the problem is bad headlines. A larger part of the problem is the fact that when people get their news from social media, they read only the headlines and don't bother with the story. Somehow people have become convinced that reading a stream of half-sentence headlines is the same thing as being informed about current events.
seibelj 5y ago
But how will venmo know what is commercial vs. paying rent? If you can mark it as rent and they won’t report, then merchants will just mark everything in such ways. In practice Venmo will just report everything for safety.
- ziml77 5y ago
  It's up to you to the both parties to ensure that the payment is marked correctly. And services like Paypal already have a reason to kick people off who aren't choosing the right transaction type. Paypal doesn't take a fee from friends & family and other gift payments, so it's already in their best interest to find who's abusing it. Also I can't imagine the platform would be liable if they are not the direct cause of misreported transactions.
- ketzo 5y ago
  Venmo is already trying to solve this by incentivizing users to flag payments themselves. When you go to pay someone, there's a pretty big box on the screen that says "Are you paying for goods or services? Protect your purchase here" with a little toggle button, and an explanation that the seller will pay a fee in return for you being able to get a refund.
- pests 5y ago
  It's not up to Venmo to report. They are just providing extra information to the IRS to cross check. Even if you mark it as such in-app; as a business you still have a legal duty to correctly report the income your business made. Not doing so is already illegal. This just helps the IRS catch this type of fruad easier. There's no extra taxes or anything - the $600 or more is taxed when reported correctly (as it was before this change, and how amounts under $600 are taxed as well - business income).

voakbasda 5y ago

The fun here stems from the fact that many small business owners use the friend-to-friend side of these payment services. These services either will be cracking down on business use of those accounts (and thus push people off their platform), or they will be forced to report all transactions across all accounts.

MattGaiser 5y ago
The services don't seem too concerned about small businesses abusing the friend to friend options for their own purposes, so I can easily see it being the latter.
- ketzo 5y ago
  Venmo, at least, is absolutely concerned about it. The app really tries to get you to flag payments as "business" any time you're paying someone.
  - voakbasda 5y ago
    If you pay someone as a business, they eat the transaction fees. If they have you pay as a “friend”, then the customer pays additional fees, increasing the total cost of the transaction. Any business doing that is breaking the terms of use. I can imagine it only a matter of time until they start suspending customer accounts for not flagging such transactions.
reaperducer 5y ago
The fun here stems from the fact that many small business owners use the friend-to-friend side of these payment services. Unpopular opinion, but I'm OK with eliminating this loophole. I went to a record shop a couple of weeks ago and when I went to pay, the guy didn't take Apple Pay. Or any kind of credit card. All he took was Venmo and Facebook. Fortunately, I had cash. But if you can't even shell out $5 for a Square reader to take credit cards, you're not a business — you're a hobby. And yes, I have owned small businesses before. Three times. Each time, I took credit cards as payment. It's known as "cost of doing business." No different than paying to put up a sign, or renting a storefront.

atlantas 5y ago

BitwiseFool 5y ago

>"Note that it's commercial transactions, not your friends & family payments" For now. Once established it will be trivially easy to make this apply to all payments.

pythonaut_16 5y ago
This is asinine. If the government wants to tax all transactions you make they'll tax all transactions you make. This doesn't make that any easier. This is the government adding reporting requirements for transactions that are already taxable. It's just covering a gap where transactions weren't being reported.
- BitwiseFool 5y ago
  You can manually specify the type of transaction through Paypal as either commercial or personal. If these payment processors are building an infrastructure to report commercial payments, I posit they can re-use the code for personal transactions as well. It might be as simple as changing a few boolean flags. Realistically, a few years from now Janet Yellen will testify before congress that people are laundering money by flagging transactions as personal rather than commercial and that the Treasury has the authority to require Venmo, PayPal, and Zelle to report all transactions in order to go after tax evaders and people not paying their fair share. To calm any outrage, maybe they'll raise the threshold to $1,000 as a conciliatory measure.
  - pythonaut_16 5y ago
    From a code/business standpoint this absolutely makes things easier to report on personal transactions. My point was the thing stopping Venmo from reporting on your personal transactions is not technical. As soon as the government tells them they need to report, they will comply. Your second point is possible, but I don't see how this move really gets us closer to that, other than providing data that could be used to make the argument. How is this different than the transition to requiring online transactions to charge sales tax?

thepasswordis 5y ago

Ah, cool cool, so when the IRS accuses you of committing tax fraud because you have $12,000 of undeclared "income" due to your roomate venmoing you their half of the rent, you just have to simply prove to the IRS that you aren't a criminal!

oh_sigh 5y ago
Should be fairly easy to show monthly payments in the value of half rent between your roommate and you.
- heyparkerj 5y ago
  "Fairly easy" is never language I would use to describe showing/proving anything to the IRS
- LorenPechtel 5y ago
  Proving things to the IRS is hard. Let's go back to the stone age--the 1980s. IRS to my mother: You didn't report your income from XXXX on your tax return. Mother to IRS: I've never even heard of XXXX let alone worked for them. I'm retired. IRS to mother: If you believe the 1099 is wrong talk to the company to get them to fix it. Mother to IRS: I have been unable to even locate XXXX, please provide me with contact info. IRS to mother: We are not allowed to give out such information. I was off at college at that point and don't know how the situation was finally resolved. When I got a bad 1099 my former employer even sent out a letter explaining the problem (a bogus entry had made it onto all of our 1099s) and how to dispute it with the IRS but in that case they weren't going to be contesting it--the company had already gone under. I'm pretty sure my mother's case was an illegal with a forged SS card who used my mother's information--the company would contest a dispute over a 1099 because by their records it was correct.
  - throwawayboise 5y ago
    I've never had a problem ultimately resolving errors by the IRS. I'm sure that's not universally true, and it does take forever. Respond immediately if you are notified of an issue. If you are actively working to resolve the issue that will help avoid getting in a situation where wages are garnished or liens issued. Do everything in writing, sent by registered postal mail. Nothing they tell you over the phone is official. Keep copies of everything related to the issue forever.

csomar 5y ago

You have to be quite gullible to fall for that. If the government were to rely on people honesty, then why do this in the first place? If you were to mark these transactions, then you'd also include them in your tax return. This is just to get their foot in the door. Once it's there, it's much easier to expand the surveillance activity.