As the US tax season rolls on, new concerns of phishing scams are emerging as the new Internal Revenue Service (IRS) directive requires mobile payment apps to report commercial transactions totaling more than $600 in one year.
READ MORE: Don’t Forget This New Tax Rule for Small Business in 2022
The New IRS Rules and Phishing Scams
As of January 1, 2022, third-party payment network providers like Venmo, PayPal, and Cash App are required to send users a 1099-K form for transactions made during the 2022 tax year by mail or electronically.
Previously these providers were only required to send an IRS Form 1099-K for gross payments exceeding $20,000 and more than 200 transactions within a calendar year. It was also left up to businesses and individuals to make sure that they were reporting that income on their tax returns.
The move comes in a bid by the IRS to track payments that should be reported as income from gig workers, contract workers, and small businesses who receive income through electronic forms of payments.
This new threshold change is for payments received for goods and services transactions and doesn’t include payments made for family or friends using PayPal or Venmo for dinner, gifts, and other purchases. Moving forward if you are a business owner, it is a good idea to set up separate third-party payment accounts for your business and personal transactions to better track business transactions.
Why the Concern?
Though the measure is to cross-check taxable income concerns exist on whether the taxpayer will be exposed to phishing scams. As per the new tax code, those receiving payments for goods and services rendered through online payment services will be asked for their tax information such as their Social Security Number or Tax ID and other private data to have their payments processed.
However, scammers can take advantage of the new requirements by sending fake texts or emails to unsuspecting businesses and individuals to collect personal data and even upload malware to be used for future attacks and theft. They could masquerade as the IRS or your electronic payment providers to scam you into stealing your valuable data.
Last month a tax phishing scam made headlines targeting tax professionals. The scam included scammers attempting to steal client data and tax preparers’ identities in an attempt to file fraudulent tax returns for refunds.
The phishing email used the IRS logo and a variety of subject lines such as ‘Action Required: Your account has now been put on hold’ directing unsuspecting victims to a fake website where they are coerced in giving up their user data, login credentials, and credit card numbers.
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This is such a terrible idea. It’s a security risk like you point out, but also a reporting nightmare. Many people use these apps for splitting bills and reimbursement (since we live in a cash-light world) and it will be the consumers responsibility to tell the IRS which is income and which is not. Such a pain.