On today's episode, we're going to talk about the new tax on the middle class. You're going to want to watch this and share this if you use Venmo, Cash App, Facebook Marketplace, or any app that involves exchanging money. We're diving into the 1099K, enacted by the American Rescue Plan.
The American Rescue Act passed earlier this year directly affects the 1099K, which many people may not be familiar with. This will affect transactions starting next year. The 1099 forms people are most familiar with typically involve contract work. Here's a quick breakdown:
The 1099K comes into play for payment processors like:
Entrepreneurs using these platforms should be aware. The current threshold for the 1099K is $20,000. Anything under this amount doesn't generate a form. However, if sales exceed $20,000, a 1099K is issued for the full amount. This has significant implications for the middle class, especially with app-based transactions.
Starting in 2022, new rules will affect all transactions exceeding $600 for the year. For example:
In essence, everyone becomes an entrepreneur and is required to report these earnings to the IRS.
When the news broke about the American Rescue Act, it wasn't clear that the changes would mainly affect the middle class. This legislation lowers the threshold for generating a 1099K, essentially increasing the tax base without directly raising tax rates.
This subtle shift could bring in more tax revenue but could surprise many who aren't aware of the change.
Let us know your thoughts in the comments. Do you agree or disagree with this approach? Is it fair? We want to hear from you.
Share this with friends who use Venmo or other payment platforms. Like me, they might not know this change exists.
Thank you for listening to The BetterWealth Podcast. It would mean the world to me if you could subscribe, leave a review, and share with your friends and family.