New 1099 K Rules - Why You Should Be Worried - YouTube

Hey what's going on everybody? My name is Ryan.  Today I'm going to be talking about the new 1099k  

reporting rules from the IRS. And really the  only reason I'm doing this video is because  

it's so frustrating to see the outrage, and the  misinformation, and all the bullshit going on  

on social media. So, I figured it'd be worth  a video to hopefully get some actual relevance  

and correct information out there so people stop  freaking out about it alright. But first before  

I get into it I'd love it if you'd consider  subscribing to my channel. And if you know,  

think anybody would find this video helpful please  share it with a friend, hit the like button,  

all that jazz. Alright so on to the 1099K. What  is the 1099K? So basically prior to 2022 if you  

have a business and you accepted payments via  credit card, Paypal, Venmo as business payments,  

the reporting agency like let's say Paypal would  have to issue you a 1099K if you exceeded over  

$20,000 of sales through Paypal. So that means  you know, you'll get a copy of the 1099K and then  

they will also issue one to the IRS. So that's, so  that the IRS knows that you made at least $20,000  

of income through Paypal. Same thing with the  credit card merchants. You know, if you made more  

than $20,000 in sales then they would issue you a  1099K. So the new rules in the IRS for 2022 moving  

forward is that they've lowered the $20,000 limit  down to $600, meaning if you made over $600 then  

you're going to receive a 1099K. And you know, if  you're familiar with independent contractor rules  

you know, where you, you know prior forms were  called the 1099 Miscellaneous, now contractors to  

pay with the 1099 NEC. The reporting rules are the  same here where if you were paid more than $600  

as a contractor then you should be issued a  1099NEC. So this is kind of mimicking that rule  

of the contractors except with just credit card  and payment services. Now why are people freaking  

out about this? Well the complaints I've heard  on social media are that this is total government  

overreach. They're just trying to see what  you're doing. Trying to look into your privacy.  

And you know, they're trying to figure out what's  going on with you, track your money, okay. Another  

complaint is they're trying to steal, they're  trying to steal my money. They're trying to steal  

the money that I'm making by you know, taxing  it. Or people are complaining well what if I  

pay my boyfriends half of the rent for the month  and he gets taxed on it or I get taxed on it?  

And that's first of all, that's not even how that  works. But you know, now they're going to tax us  

because I'm paying my boyfriend through Venmo on  half of the rent. And the last complaint I see is  

just people with businesses basically saying that  they're going to switch to cash only now because  

this is bullshit. I'm going to switch to cash only  so that the government doesn't know what the hell  

I'm doing and so they can't tax my money okay. So  the first complaint or the first issue with that  

logic is that if you own a business and you're  switching to cash only so that you can avoid  

taxes, that's illegal. That's called tax evasion.  That's under reporting income, tax fraud, whatever  

the hell you want to call it, that's illegal  okay. So don't do that. All the complaints I  

just mentioned are really misguided and it's just  because people who are not familiar with the tax  

code are sharing these news stories and you know  creating outrage over them when they have no idea  

what the fuck they're talking about. So I want  to talk about the difference between like income  

activities and non-income activities and what's  going to be reported on the 1099K. So first are  

income activities. If you have a business  and you sell stuff for money, for a profit,  

that is an income activity okay, that's anything.  If you own a business and you take credit cards,  

if you take Paypal or Venmo as payments, and  you're selling a good or service for profit, that  

is income. And that should be reported on your tax  return regardless if you get issued a 1099 or not.  

What if you are your reselling items on eBay or  Craigslist? Well if you are selling items for  

profit, that is income and you should be reporting  it on your taxes. No I don't mean selling your  

three-year-old tv for 100 bucks. That is not  for profit because you likely bought that tv  

for more than 100 bucks. I'm saying if you are you  know, scouring Craigslist for really good deals  

and then selling them for a higher price than  you found them for that is an income activity.  

That is reselling. That should be considered  income and should be reported on your taxes  

regardless if you got a 1099 or not. And you know,  basically now if that's the case, you might have  

to report this income now if you haven't been  doing it before okay. And if you haven't been  

doing it before then you have been not following  IRS guidelines. Okay so what kind of activities  

are not income activities? You know this includes,  like I mentioned before, selling old items on  

Craigslist or eBay or Facebook Marketplace uh  typically are not income activities because  

you're just getting rid of stuff, kind of like  garage sales okay. You're likely selling these  

items for a huge loss because they're used,  they're old, you do not get more money than  

you paid for them. Another thing is that is not  an income activity is if you were you know, if  

you went to a fun little lunch with your friend at  Benihana and your friend paid for it and then you  

wanted to pay him half of it back on Venmo because  you know you felt like that was the right thing  

to do. That is not an income activity to your  friends. That is not going to generate a taxable  

1099 document. You know if you do this 20 times  over the year to the same friend, you paid him,  

paid the same friend and maybe you exceeded over  a $1,000 in payments he's not going to get a 1099  

for that because that's not an income activity.  You're just reimbursing your friend. And another  

complaint I see is what if you're just paying your  spouse half of the rent or half of the mortgage  

because you know they pay for the whole thing out  of their primary bank account and then you just  

want to pay them back each month. That is also  not an income activity to you or your spouse.  

So that won't be reported on 1099K. And I hope a  lot of people just calm their asses down on this  

okay. So how does PayPal or Venmo know whether  or not you're paying someone for Benihana  

or if you're paying someone for a good or service  for a business? Well how are they supposed to know  

that? Are you supposed to notate on the notes  you know, hey this is for my fun little lunch  

with my friends, and this is for like a massage  that I paid for for a profitable service, service  

or business? Well when you go to pay somebody on  PayPal or Venmo right before you pay them you have  

the option to choose whether you you're paying  a friend or you're paying for goods and services  

okay. Goods and services usually through Venmo  or PayPal offer like a customer protection and a  

refund policy and all the stuff that allows you  to get your money back if you were to receive  

like a shitty product or a service. Then  you have a process to claim your money back  

and get a refund. Paying for goods or services  as a business also will charge the seller a fee.  

So that's you know, the main thing that you'll  see there is when you pay for goods and services  

the seller will be charged with fees so that  PayPal can accommodate customers who have  

refunds, claims, and all that  stuff. If you're paying a friend  

with your checking account then there usually is  no fee through PayPal or Venmo. You also can't  

have any process to get that money back  because if you're really just paying a friend  

then you can just ask your friend hey dude just I  overpaid you please send me some money back. Okay  

so if you pay for something, if you pay for  something as a goods or service that would  

count towards the 1099K reporting for the person  that you're paying. If you're paying somebody as  

a friend that will not count towards the 1099K  reporting for your friends. If you're selling  

your old stuff on Craigslist and you're worried  about people choosing the option that they're  

paying you as a good or service just please  ask them not to because this, because you know  

I have not had that happen to me. I'm sure  it's happened to some people but you know how,  

how pissed off would you be if you're selling your  old tv for 100 bucks and then your buyer pays you  

and you receive like $85 of it because PayPal took  what, took out like $15 of fees. Then you're not  

really getting 100 bucks and you know this is not  really like a, like a transaction that should be  

a sale of goods or services even  though that's what it says on PayPal.  

I wish they would make that wording a little  more clearer you know because that is not like  

a taxable transaction. So I, you know, I hope that  PayPal or Venmo make those options a little more  

clear for people so they actually just like like  paying a friend. When you're buying, when they're  

buying your old stuff on PayPal or Venmo. Should  you be worried about the change of this rule? I  

would say no. The only people that should truly be  worried are people that are under reporting income  

or not reporting income at all that, when  they should be reporting it. You know the,  

the folks that are screaming that they're going  to take their business to all cash now, those are  

the people that should be worried okay. Because  they were probably not reporting their income  

anyway. And another note there, if you are paying  somebody for a, as a business for goods or service  

and they specifically ask you not to pay them  as a business, and they ask you to pay them  

as a friend, I would probably not work with  that person. You know they are either trying  

to avoid taxes or the goods or services they're  providing are really not adequate, so they don't  

want any type of claim of refunds processed on  their goods or service. So it's one thing to  

forget to pay them as a business or it's one  thing to just pay them as a friend and just  

not even think about it. It's another to ask your  customers to not pay them as a business. That is,  

that takes a whole new level of shadiness in my  opinion. So that's all I've got for today. Thanks  

for joining me. Sorry for my half rant here. I  just wanted to clear the air here. You don't have  

to you know, the majority of people who are like  just exchanging money and reimbursing each other  

for things they don't have to be  worried about this new change of rule,  

it's not going to affect them. Yeah, hope you  stay safe. Take care. And I'll see you next time.