D. Rhodes, CPA, Writer and Editor
From Square readers to Venmo transfers to your booking platform, the way clients pay for services has evolved dramatically. Last week the IRS released Notice 2024-85, which enclosed important changes to how digital transactions are tracked and reported.
When we talk about digital transactions – specifically payments - we're talking about Third-Party Settlement Organizations (TPSOs) - companies like:
PayPal
Venmo
Cash App
Square
Your booking platform's payment system
These companies act as the middleman between your clients' payments and your bank account, and they're required to report your transaction data to the IRS when you hit the below thresholds.
2024: $5,000 threshold
Payment processors will report when your total digital payments exceed $5,000
No minimum transaction count required
This is a significant drop from the previous $20,000/200 transaction threshold
2025: $2,500 threshold
Further reduction to $2,500 for total digital payments
Still no minimum transaction count
Another step toward the final threshold
2026 and Beyond: $600 threshold
Final threshold set at $600
Applies to total yearly digital payments
No minimum number of transactions required
According to recent Federal Reserve data, digital payments now account for over 70% of all business transactions. These new reporting requirements aim to create a more accurate picture of the modern economy.
The IRS has specifically designed this as a phased approach to give businesses time to adapt. For 2024, they're even providing relief from certain penalties related to these reporting requirements, making this the perfect time to ensure your digital payment systems are properly set up.
Important Note: These changes don't affect how you can accept payments - they only change how payment processors report your transactions to the IRS.
As we move toward an increasingly digital economy, staying informed about these changes helps position your business for success. Remember, these reporting changes are about modernizing how business income is tracked, not limiting how you can accept payments from your clients.
Remember: Our ultimate goal is to help you save time and money, while building wealth and legacy.
The choice is yours, but the clock is ticking. Reach out today so we can help get you from where you're at, to where you want to be. Your move boss.
*This article provides general information, not individual tax advice. Tax situations vary; consult with a qualified tax professional, like myself, for advice specific to your circumstances.
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