Always Mind Your Ps and Qs When Reporting Income
The Internal Revenue Service (IRS) is now targeting third-party payment apps such as Venmo and PayPal.
If you receive a payment for something that's $600 or more, the IRS is going to look for any unreported income.
Meanwhile, there's insider trading in Congress, and guys like FTX CEO Sam Bankman-Fried, who stole $10 billion, are walking the streets. And we're looking at $600 payments on Venmo? I'll tell you, it’s hard not to be cynical these days.
Anyway, the short of it is that you need to report income on payments exceeding $600 on earnings generated through stuff like part-time work or a side gig.
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Don’t worry about reimbursements if you scored your friend a bunch of Chipotle burritos. The IRS won’t audit you over those types of transactions.
This is all about income, so if you’re, say, a side hustler or contractor, always report your compensation even if you don’t receive a 1099 form.
Save Your Paperwork
I've been paid for DJing a couple of times. Not much—under the $600 threshold.
But my expenses vastly exceed my income. So, I don't declare DJing as an occupation. If I did, I would run at a loss, and then there would be other issues because I spend thousands of dollars on music and equipment every year.
Just make sure you save your paperwork if you have a side gig.
Now, if you go to a casino and win money, they give you a W-2G tax form under certain circumstances, including:
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Horse race winnings of $600 or more (if the payout is at least 300 times the wager amount)
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Bingo or slot machine winnings of $1,200 or more
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Keno winnings, less the wager, of $1,500 or more
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Poker tournament winnings of $5,000 or more
The way this works is, if you’re a professional gambler, you keep track of your wins and your losses. You keep a log, and you can deduct your losses against your wins.
But if you just go to a casino and win 10,000 bucks and cash out, and then you plow it back into the casino and lose it, you're still going to owe taxes. Heads I win, tails you lose.
Basically, whether you play the ponies or pull slots, your gambling winnings are subject to federal income tax.
The moral of the story is to always mind your Ps and Qs.
Stay out of Hot Water
Not reporting income will get you in big trouble.
Since I'm in the music industry, I'm thinking a lot about club promoters who receive massive amounts of payments through Venmo. They will have to start declaring that—and they're not the only ones.
I mean, there are a lot of people who do business on platforms such as Venmo, PayPal, and Cash App.
I guess the alternative is you can deal only in cash, but that’s much less convenient. It's also hard to move large amounts of cash. Plus, doing so is likely to raise some eyebrows.
You’re better off just playing by the rules.
Jared Dillian
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