Side-hustlers who get paid via Cash App and Venmo risk being audited if they don't report their earnings, IRS warns
AP/Reuters
- The IRS warned people who make over $600 from side hustles should declare earnings to avoid audits.
- Workers who get paid via apps including Venmo, Paypal, and Cash App should file the tax form 1099-K.
- Tax expert Lisa Niser told Insider the "worst case" could be penalties for insufficient filings.
People who earn money through side hustles could be at risk of a tax audit if they don't report earnings over $600.
The Internal Revenue Service (IRS) warned this week that side hustlers and part-time workers should declare payment they've received from apps including Venmo, PayPal, and Cash App over the $600 threshold.
People who are earning income in addition to their full-time job, as well as gig workers, should file the tax form 1099-K to declare earnings, the IRS said. Failure to do so could trigger an audit from the tax collection agency.
The threshold of how much workers earn before they need to make a tax filing has dropped significantly since last year. It used to be for earnings over $20,000 through more than 200 transactions, but it's now it's any payment over $600.
Tax expert Lisa Niser told Insider that the "worst case" for people who don't declare earnings to the IRS is that "they are audited" and could be subjected to penalties and accrue interest.
Niser also advised people running side hustles to take a course on taxes – or hire an accountant.
"I personally believe an accountant is a great investment for everyone as a good one will provide more than a tax return," she said. "The knowledge and access to information can be invaluable."
The change of when workers need to declare earnings came into effect last year when the COVID-19 Stimulus Package, also known as the American Rescue Plan of 2021, was passed by Congress.
"It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K," the IRS said on its website.
It added: "You must report on your income tax return all income you receive. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments."
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