DMV LOCAL RECAP: IRS Warns PayPal, Venmo Users of Tax Change
As tax filing season approaches, the IRS is alerting Americans to an important change that could affect those who use third-party payment platforms like PayPal and Venmo. The Department of the Treasury and the IRS have announced proposed regulations that clarify when these companies are required to report payments or withhold taxes.
Under the updated guidance, third-party payment platforms will only be required to report income or perform backup withholding if two specific conditions are met. First, a user must receive more than $20,000 through a single payment network within a calendar year. Second, the user must complete more than 200 transactions during that same period. If both thresholds are not met, the platforms are not required to withhold taxes or report the payments to the IRS.
For example, if someone sold items through Venmo and earned $15,000 across 150 transactions, neither requirement would be met, meaning the platform would not withhold taxes. However, taxpayers are still responsible for accurately reporting any taxable income when filing their returns.
The IRS says the proposed changes are intended to reduce confusion for everyday users as filing season begins. Public comments on the proposed rules are open through March 10, and the regulations could take effect for the current tax year. Officials encourage taxpayers to read official guidance carefully and stay informed through reliable sources rather than social media summaries.
