Trainer tips have always been considered income and should be reported and included on your tax return. However, a change in law means trainers need to be mindful the income is not double reported going forward.
What Changed?
As part of the American Recuse Plan Act that was signed into law on March 11, 2021, changes were implemented that effects how third-party transaction companies, such as Paypal, Stripe, Venmo, and Square, must report earnings starting with the 2022 tax season.
Previously, it was unlikely a 1099 statement would be issued to a trainer if a player provided a tip through an electronic payment platform. However, the change in law will mean anyone who is paid more than $600 in Paypal, Venmo, etc. and it is labeled as goods and service will be issued a 1099-K form going forward.
What should I do now?
Although this change will have no impact in how you report income on your 2021 tax return, you should begin keeping good records of where your income is coming from to avoid double counting tips you receive through electronic payment. You should also be mindful and tracking potential expenses (including keeping receipts) related to income you earn from tips.