If you use Zelle, CashApp, Venmo, or another peer-to-peer cash transferring platform, KEEP READING:
The Biden Administration passed a new tax rule in the American Rescue Plan Act and it is being dubbed “The $600 Tax Rule.”
Starting January 1, 2022 if you receive $600 or more in a year on a peer-to-peer cash transfer platform you will receive a 1099-K form (for income reporting purposes). You are federally required to report that money as taxable income.
So if you SELL items online and use these cash transferring platforms, you must provide the IRS with receipts that prove you paid more than what you sold them for so the money you collect is not considered taxable income.
The purpose of this is to “close the tax gap.” My friends, please keep track of your big ticket purchase receipts in case you ever decide to sell, and ask to be paid in CASH if it is not for business purposes.
Why is this good???
So the government can crack down on people not claiming taxable income on goods or services sold via peer-to-peer cash transfer platforms.
Why is this bad???
Because if you sell your old couch or loan money to a friend who pays you back on the same Zelle, Venmo, etc. that handles your business transactions also, you will have to pay taxes on the sale of your couch if you cannot provide a receipt, and you have to explain to the IRS why you gifted your bestie money and then you might have to pay taxes on the money you loaned them when they pay you back. The list goes on…
REPOST
https://www.congress.gov/bill/117th-congress/house-bill/1319
There are lots of changes for 2021 tax season.
Highlighted some of them hereunder.
CHILD TAX CREDIT
The $2,000-per-child credit rises to $3,000…$3,600 for children under age 6…and 17-year-olds qualify. The credit is fully refundable, and IRS is required to pay 50% of it in advance to qualifying families.
The higher credit begins to phase out at AGIs of
$75,000 for singles,
$112,500 for household heads and
$150,000 for joint filers.
The credit is reduced $50 for each $1,000 of AGI over the applicable threshold amounts. The phaseout applies to the $1,000 or $1,600 increased credit amount for 2021 and not to the $2,000 credit. Families who aren’t eligible for the $3,000 or $3,600 credit, but who have AGIs at or below $400,000 on joint returns or $200,000 on others, still get the $2,000 credit.
STIMULUS CHECKS
Millions of taxpayers got a third round of stimulus checks of $1,400 for singles
and household heads and $2,800 for joint filers, plus $1,400 more for each dependent.
The money isn’t taxable. It is an advance payment of a tax credit on the 2021 return.
CHARITY
The following easings on cash gifts to charity in 2020 also apply for 2021:
Nonitemizers can write off up to $300 of charitable cash contributions.
For 2021 only, the ceiling is $600 for married couples who file a joint return.
The 60%-of-AGI limit on cash contributions by individuals is suspended.
The taxable income limit on charitable gifts of cash by C corps is 25%.
TAX BREAKS
A batch of tax breaks that were set to expire after 2020 are extended.
Some were extended permanently, some through 2025 and others for one year.
Among the permanent breaks: The 7.5% adjusted-gross-income threshold
for deducting medical expenses on Schedule A. Lower excise taxes on wine, beer
and liquor.
The deduction for energy-efficient improvements to commercial buildings.
Included in breaks extended through 2025
MEALS & ENTERTAINMENT
Businesses can deduct 100% of business meals in 2021 and 2022.
Congress suspended the 50% haircut for two years to encourage restaurant dining.
This includes client meals as well as meals for employees on business travel.
DEPENDENT CARE AND FSA
There is relief for health and dependent-care flexible spending arrangements.
Employers may opt for FSAs to permit carryover of unused amounts from 2020
to 2021, and from 2021 to 2022, and to give a 12-month grace period for unused funds.
STANDARD DEDUCTIONS
Standard deductions for 2021 rise a bit. Married couples get $25,100
plus $1,350 for each spouse age 65 or older. Singles claim $12,550…$14,250
if 65 or up. Household heads get $18,800 plus $1,700 once they reach age 65.
Blind people receive $1,350 more ($1,700 if unmarried and not a surviving spouse).
GIFT TAX
The gift tax exclusion remains $15,000 per donee. You can give up to $15,000
($30,000 if your spouse agrees) to each child, grandkid or any other person in 2021
without having to file a gift tax return or tap your lifetime estate and gift tax exemption.
TAX BRACKETS
| Marrieds: If taxable income is | The tax is |
| Not more than $19,900 | 10% of taxable income |
| Over $19,900 but not more than $81,050 | $1,990.00 + 12% of excess over $19,900 |
| Over $81,050 but not more than $172,750 | $9,328.00 + 22% of excess over $81,050 |
| Over $172,750 but not more than $329,850 | $29,502.00 + 24% of excess over $172,750 |
| Over $329,850 but not more than $418,850 | $67,206.00 + 32% of excess over $329,850 |
| Over $418,850 but not more than $628,300 | $95,686.00 + 35% of excess over $418,850 |
| Over $628,300 | $168,993.50 + 37% of excess over $628,300 |
| Singles: If taxable income is | The tax is |
| Not more than $9,950 | 10% of taxable income |
| Over $9,950 but not more than $40,525 | $995.00 + 12% of excess over $9,950 |
| Over $40,525 but not more than $86,375 | $4,664.00 + 22% of excess over $40,525 |
| Over $86,375 but not more than $164,925 | $14,751.00 + 24% of excess over $86,375 |
| Over $164,925 but not more than $209,425 | $33,603.00 + 32% of excess over $164,925 |
| Over $209,425 but not more than $523,600 | $47,843.00 + 35% of excess over $209,425 |
| Over $523,600 | $157,804.25 + 37% of excess over $523,600 |
| Household Heads: If taxable income is | The tax is |
| Not more than $14,200 | 10% of taxable income |
| Over $14,200 but not more than $54,200 | $1,420.00 +12% of excess over $14,200 |
| Over $54,200 but not more than $86,350 | $6,220.00 + 22% of excess over $54,200 |
| Over $86,350 but not more than $164,900 | $13,293.00 + 24% of excess over $86,350 |
| Over $164,900 but not more than $209,400 | $32,145.00 + 32% of excess over $164,900 |
| Over $209,400 but not more than $523,600 | $46,385.00 + 35% of excess over $209,400 |
| Over $523,600 | $156,355.00 + 37% of excess over $523,600 |