Digital wallet platforms have become ubiquitous over the last decade, even making their way into our everyday language. It’s not uncommon to overhear someone at a restaurant saying, “I’ll get the bill, just Venmo me your half.”
The millions of businesses, individuals, and organizations that use these platforms to issue and receive payments can breathe easy after the Internal Revenue Service announced in December that it will delay the implementation of a controversial new tax policy.
As part of the American Rescue Plan, a pandemic-related stimulus bill passed by Congress in early 2021, the IRS was directed to require that individuals report digital wallet transactions of more than $600. This would be a significant policy shift.
Currently, individuals and businesses in America do not need to submit 1099 forms for digital transactions unless they meet two conditions: they made more than 200 transactions over the course of the year and these transactions totaled more than $20,000.
This new initiative, reducing the annual monetary cap from $20,000 to $600 and eliminating the volume threshold entirely, would mean that millions more businesses and people would now be required to submit 1099 forms for their digital transactions.
Following uproar from lawmakers and business owners alike, the IRS announced a one-year moratorium on the implementation of this policy. Now, it will not take effect until 2024.
This saga illuminates an important principle: whether you’re a small business, an individual proprietor on Etsy, a gig economy worker, or even a college athlete leveraging your newly acquired NIL status, you should have a compliance mechanism built into your payment infrastructure.
For individuals and smaller organizations—read, anyone without a full-scale, in-house accounting team—this is easier said than done. Ensuring that all payments you issue comply with ever-changing tax laws and are reported to the proper agencies can be a herculean task, and a time prohibitive one for many companies working to get off the ground.
That’s where Payment Labs has your back. Payment Labs is a turnkey solution for your payment needs that allows you to seamlessly issue payments around the world that comply with all relevant tax regulations and laws. Our concierge service designs and implements a payment system bespoke to your company’s needs, taking the burden of issuing and reporting payments off of your team—and allowing you to focus on the important work you’re doing.
As the IRS and its global counterparts bring digital wallet services under increasing scrutiny, it will be essential that businesses and individuals are prepared to align their payment infrastructure with this new regulatory regime.