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 by user starting with the 2022 tax season.
The change in the law lowered the threshold for issuing a tax (1099-K) to $600. There has been some confusion as to whether sending money electronically to a teammate, friend, or family member could cause them to have to report that as income on their taxes.
Will I receive a 1099-K if I receive more than $600 through PayPal or Venmo?
It depends on whether the money is sent through/received through a business account or if the transaction is labeled as goods and services. If the money is sent through a personal/friends & family account, no 1099-K will be generated. This means if you pay the team’s dinner bill and receive reimbursement from a teammate exceeding $600 over the course of the year through a personal Venmo account, you will not be issued a 1099-K and not have to pay tax.