(FOX 9) - If you use third-party payment platforms, such as Venmo or PayPal, you may soon be under added scrutiny by the Internal Revenue Service.
Starting this year, transactions that exceed $600 over the course of a year need to be reported to the IRS. While the rule is aimed at individuals receiving payment for business services, professionals say non-taxable payments may get roped into audits on accident.
While reimbursing a friend for an out-of-town trip or restaurant bill, for example, is not the intended focus of the new rule, experts say you may want to be prepared to prove it if the IRS comes knocking on your door.
University of St. Thomas Finance Professor David Vang suggests keeping track of receipts and setting up separate accounts for personal transactions and business transactions, in case you need to provide proof to the IRS.
"Its worth the effort to set up a separate account," said Vang. "If you’re selling property – a piece of furniture or something-do it on your personal account …and make your business account separate."
Vang says there are some gray areas that could be argued either way. If you sell a large household item to a neighbor for more than $600, for example, that could be considered a business transaction.
"There are some individuals who have a lot of expensive clothes in their closet and if they start selling a lot of those things to the IRS that could look like income," said Vang. "But if it’s just a couple of transactions a year – I sold a couple of pieces of furniture or a car - you can probably get away with it."
The change was included in the American Rescue Plan, a COVID-19 stimulus bill passed by Congress in 2021, and applies to transactions made in 2022.