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Various social media posts circulating in late December 2021 claimed that thanks to coronavirus stimulus legislation known as the American Rescue Plan, U.S. President Joe Biden's administration and Democratic legislators would begin spying or snooping on users of cash apps like PayPal and Venmo. Here is an example of one such post: The truth is, unsurprisingly, more nuanced, but the bottom line is that, contrary to what the above Twitter posts state, the effect of the legislation in question isn't that the Biden administration or Democrats will be tapping into or spying on bank or cash app accounts. This is a misleading characterization. What the legislation does is significantly lower the threshold for reporting taxable transactions made using cash apps like Venmo, PayPal, or Zelle for goods and services to the IRS. And when you reach that threshold, the app companies will then be required to send a tax form called a 1099-K to both you and the IRS. A 1099-K is, according to PayPal, an informational tax form that is used to report goods and services payments received by a business or individual in the calendar year. As of this writing, the current threshold for such reporting is $20,000 and 200 payments in goods and services. Come Jan. 1, 2022, that reporting threshold will drop down to $600. This could have a significant impact on platform users' tax returns. Here's how Bloomberg Tax described how users might experience the change: According to PayPal, which owns Venmo, the change doesn't affect people who use the apps for personal transactions, like paying a friend back for your share of dinner, gifts, or chipping in for trips. PayPal also states that its app allows users to categorize their own transactions as personal versus rendering payment for goods and services.
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