Tax controversy attorney Adam Brewer unpacks how a Zelle loophole to new IRS regulations on apps like Venmo could spell trouble for taxpayers.
Tax controversy attorney Adam Brewer unpacks the Zelle ‘loophole’ to new IRS regulations on third-party payment processors and what that means for taxpayers.The payment network says the new IRS 1099-K reporting rule does not apply to them. However, one tax attorney issued a warning to business owners who are relying on Zelle to dodge the tax man.
Unlike third-party payment processors, Zelle is a bank-to-bank service that handles automated clearinghouse transactions, meaning it does not hold funds. According to Zelle's website, it "does not issue 1099K forms for payments made on the Zelle Network."Popular third-party platforms, however, are required to submit a 1099-K form to the IRS as well as users should their activity meet the new threshold guidelines.
"Zelle is saying this is more like a check payment because it's from bank to bank. And check payments have never been reported on 1099-K, whereas Venmo, some of these other apps, they're saying, okay, this is a legitimate debit card, credit card purchase. We're caught up in this new regulation. We're going to report it," Brewer explained. "Zelle really hasn't been clear in saying this is why this doesn't apply to us.
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