Do you remember when Treasury Secretary Janet Yellen proposed that the IRS be informed if you had money coming into your bank account exceeding $600 per year? The good news is that proposal was dropped.
But there’s bad news. The IRS is already snooping in your PayPal, Venmo and Cash App accounts. That started on January 1. So how much money triggers the IRS snooping?
You guessed it: that whopping big number of $600. Not per month, mind you, but per year.
I learned this from that publication favored by tax resisters: the Washington Post.
It’s in a January 21 article titled “Venmo, PayPal and other payment apps have to tell the IRS about your side hustle if you make more than $600 a year.”
The author, Michelle Singletary, writes, “To help identify tax cheats, the IRS as of Jan. 1 started requiring all third-party payment processors in the United States to report payments received for goods and services of $600 or more a year.”
But what if Aunt Betty sends you $700 when you’re short on rent one month? How will the IRS know that that’s not payment for goods and services? Singletary explains that the IRS is “trying to track income received, not the transfer of funds between family and friends.” It probably is trying to do that.
But how good will it be at distinguishing between the two?
Singletary writes, “if you purchased a dining-room table for $1,000 and sold it for $600, this amount would not be subject to income tax or result in PayPal sending you a 1099-K.” How in tarnation would the IRS know that you bought it for $1,000? What if you purchased it with a check three years ago?
Even Singletary, who favors this regulation, seems to doubt the IRS. “It’s still possible that you might mistakenly receive a 1099-K, which would require you to explain to the IRS that the money wasn’t taxable.”
We’ve all heard the line, “If you have nothing to hide, you have nothing to worry about.” But many people paying all the taxes they legally owe still “have something to hide.” They want privacy.
If Janet Yellen thinks our privacy doesn’t count, I’ve got a deal for her. I want her to tell me to the penny how much money she made last year. After all, she’s got nothing to hide, right? Or am I missing something?
By the way, this new power given to the IRS was in the American Rescue Plan, which President Joe Biden signed on March 11, 2021. Are you feeling rescued?