Receive $600 from Venmo? Be Ready for a Visit from the Tax Man

The Pentagon lost track of $2 trillion in assets, while the federal government runs a trillion-dollar budget deficit every year. But should the American people earn $601 on Venmo or PayPal, then may God have mercy on their souls because they will receive a visit from the tax man. A new rule from the IRS could leave millions of taxpayers stunned when they file their taxes in 2023. So much for President Joe Biden's pledge to only target millionaires and billionaires. It turns out that a 63-year-old grandma who is selling knitted blankets online will face as much scorn and wrath as the uber-rich.

Taxing Venmo Payments

Starting next year, taxpayers will be mandated to report transactions completed through payment applications such as Cash App, PayPal, and Venmo if they total $600 or more. The tax-collecting agency recently published an explainer, informing small business owners and entrepreneurs that they should expect to receive Form 1099-K for third-party payments that top $600. These payment processors will now also be forced to report a client's business transactions to the IRS if they surpass $600 for the year, which is a dramatic change from the previous minimum of $20,000.

The change was completed by the Democrats when they approved the American Rescue Plan (ARP) in March 2021. The legislation did not receive Republican support.

Proponents contend that this is a much-needed adjustment to ensure that Americans are not evading their taxes by refusing to report the total amount of their gross income. However, critics purport that the policy will hurt taxpayers, result in government overreach, and contradict the White House's promises. Industry observers also anticipate that it will prevent people from partaking in the gig economy, especially at a time when half the country is living paycheck to paycheck amid soaring price inflation.

The System is Broken

Apps like PayPal and Venmo changed the payments industry. They served as legitimate and cheaper alternatives to the global establishment finance sector. Unfortunately, some of the titans in the sector adopted the same mantras of Corporate America: wokeness and bowing down to the state. PayPal has metastasized into a Karen, choosing to deplatform users, from freezing funds to shutting down their accounts. This is not a conspiracy theory found in the doldrums of the Twitterverse. It is an opinion shared by co-founders Elon Musk and Peter Thiel.

Musk compared the tech juggernaut to an episode of Black Mirror, while Thiel charged that it is "totalitarian" to freeze accounts and "destroy people economically." David Sacks, PayPal's initial COO, described the current leadership as "woke," thanks to the firm's objective of advancing "up the corporate totem pole of woke capitalism.”

The $82 billion digital payments platform with 325 million account holders worldwide has long been criticized for many of its measures, particularly freezing client funds and refusing to offer an explanation. In October, PayPal issued an update to its "Acceptable Use Policy" that customer accounts would be slapped with a $2,500 fine if they participated in "the sending, posting, or publication of any messages, content, or materials” that promoted disinformation and hate speech. The announcement caused such a backlash that PayPal was forced to address the issue, though it claimed that it was an error and apologized for the confusion. But the issue has become so egregious that a federal lawsuit was filed by three account holders, accusing the firm of violating racketeering laws.

Beware the Digital Dollar

The big banks have closed accounts, and online payment providers have frozen funds. Both entities have also acquiesced to unreasonable government requests. (And, yes, these are private organizations that can do whatever they want!) Sure, businesses and consumers can always utilize cash, but in an increasingly cashless world, this is unfeasible, especially with the gradual introduction of central bank digital currencies (CBDCs). The Federal Reserve Bank of New York (FRBNY) recently launched a 12-week trial with nine major financial institutions to experiment with digital currencies. The pilot project essentially consists of a bank running transactions using CBDCs. It is almost inevitable that the US will unleash an e-dollar to rival the e-yuan, meaning that more liberties will be violated, more nudging will be employed, and more canceling for possessing the wrong opinion will occur.