IRS wants a cut if you collect more than $600/yr through third party money apps

MEMPHIS, Tenn. — Just about everyone has used a money transfer app, like Cash App or Zelle, to pay for things.

Once you receive a certain amount of money, the IRS may come after you for their cut next year.

Amber Houston is the owner of the Houston Trichology Center.

”At Houston Trichology Center, I study the scalp. I have been a hairstylist with a license since 2015,” Houston told FOX13.

In her line of business, she accepts payment via card, cash, and through money transferring apps.

”I am honest with my taxes. I count my cash on hand,” said Houston.

But she is concerned about a new law through the American Rescue Plan that requires payment transfer apps to report payments of $600 or more to the IRS.

”With a 1099 coming from Cash App or whatever, it does not affect me. However, I do want to know if they will be able to split my transactions from a gift or tip,” said Houston.

”Tips are supposed to be reported, but that is not what they’re really looking for. They’re looking for people with PPP stuff but not reporting that as income,” said Selma Brinson of Brinson Tax Service LLC.

Brinson said this does not apply to people repaying friends or receiving money from family members that exceed $600.

”You will get a report, but that is not considered taxable income, so you can disregard the report. It’s really not aimed at the little guy. It’s for businesses not adequately reporting income,” said Brinson.

Currently, the limit is $20,000 or 200 transactions in a year for these types of apps. The new law drops that number down to $600. 

This new rule goes into effect this January.