The sign on the door for the hairdresser read “Cash only, please!”
To help identify tax cheats, the IRS as of Jan. 1 started requiring all third-party payment processors in the United States to report payments received for goods and services of $600 or more a year.
This is going to be a jarring change for some self-employed gig workers and people with side hustles.
For others who use such payment platforms for personal transactions, there’s nothing to worry about.
“The government has been looking for ways to close that tax gap by making more transactions reportable to the IRS,” said Eric Bronnenkant, head of tax for the online financial adviser Betterment. “The ultimate goal is laudable, which is to make it harder for people to underreport their taxable income.”
Let’s walk through what you need to know about the new IRS reporting rule.