May 26, 2022

Thanks to new legislation that went into place at the beginning of this year, I predict that a lot of unsuspecting small business owners are about to fall victim to a fresh scam.

The scam will relate to legislation around new tax reporting rules that will affect millions of freelancers and small businesses. As I explained in an earlier column, beginning for the 2022 tax year, if you receive more than $600 in total payments during the course of the year from a payment service like PayPal, Venmo (which is owned by PayPal), Square, Stripe or online sales of your products made through Amazon, Etsy and other marketplaces – regardless of how many customers are paying – that payment service is required to report that amount to the IRS and to you by sending a Form 1099-K – used for reporting payments via these third parties – in early 2023.

You may think this is a headache, but it’s nothing compared with the headache now faced by these payment providers. They now have an enormous new tax reporting requirement. Unfortunately, these providers probably don’t have all the information they need about all the businesses they serve in order to properly file these forms, and if they don’t get that information, the rules say that they’re required to withhold 24% of the payment and remit to the IRS. They don’t want to do that and small businesses don’t want this to happen either. So they will soon be reaching out to their customers for more information. Already, they’re…

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