Why Fantasy Sports Transactions Via Venmo and PayPal Could Get Expensive: IRS Reports
For users of Venmo, PayPal, and other third-party payment networks, the IRS is issuing a 1099-K form. This could result in filing taxes depending on the amount. In such a case, a financial advisor might be able to lower tax liabilities based on a planning strategy. The 1099-K form is a record of all payments from Veno, PayPal, and other third-party networks. In the form, there is a column for an aggregate of the total amount of money that one receives through these payment networks over a financial year. One receives a 1099-K form for each platform he uses when the amount surpasses $600. This law could impact the list of reputed casinos listed on sites such as Promoguy, most of which offer PayPal, Venmo, etc as payment methods.
Fantasy Sports Transactions Via these Payment Platforms
Earlier, winnings drawn from Fantasy Football leagues could evade taxes easily. However, in 2022, the IRS started paying closer attention to winnings drawn from such bets. Prior to 2022, popular payment platforms such as Cash App, Venmo, and PayPal only generated a 1099-K if the transaction number reached 200 with a total drawing of $20,000. This amount was significantly lowered to $600 in 2022 and the minimum amount of transactions was removed. This new rule basically indicates that a gambler might receive a 1099-K in 2023 based on the stakes of the league. However, the IRS also brings in the benefits of reporting the extra amount post $600 to encourage people. While PayPal has been foraying into new ventures of integrating its payment system with “Tap To Pay” Apps on iPhones, etc, this IRS regulation could prove to be a deterrent.
IRS Restrictions
IRS calls the 1099-K form an IRS information return that is used for reporting certain payments for improving voluntary tax compliance. These payment transactions from third-party payment networks are under IRS observation. This is mainly implemented due to multiple reasons. Loan providers often check tax return copies. In the case of understating income, it could lead to complications. For people looking to purchase properties, tax returns are used for verifying income. Social security benefits are also affected since one earns a Medicare or social security credit for every $1510 in covered earnings across a financial year. One must earn $6040 to be eligible for 4 credits in a year which is the maximum. To be able to qualify for social security benefits, one must have at least 40 credits.
How Are Taxes Affected Post-IRS Implementation?
Post-IRS intervention, tax structures were bound to change. Payment applications now confirm tax information like SSN and individual tax identification number. However, there are benefits to this too. Earlier 1099-K took a major chunk of time to manually file taxes. Now, the 1099-K includes only third-party payment gateways which means that people get one form for filing out taxes and need to fill out 1099-NEC for direct deposits. The IRS is not tracking personal transactions like favors, gifts, or reimbursements. Payments that are under the radar are flagged as payments for any good or service from a vendor.
If you are still wondering whether one can receive a 1099-K from PayPal, or Venmo, the answer is yes. The IRS is delaying the $600 transaction rule from 2022, however, in 2023, it might be put into action. However, third-party payment network providers like Square, Stripe, and Amazon need to report all payments for goods and services to the IRS in order to maintain transparency. Businesses that need to report income over $20,000 include Poshmark, Depop, StubHub, and Etsy. In case of a false transaction marked on a 1099-K, a person can always reach out to the payment application to verify the details since these companies report all payments they process during a financial year.