The news: Effective January 1, 2022, payment apps like PayPal, Venmo, and Cash App are required to report users’ business payments that exceed $600 in a calendar year to the Internal Revenue Service (IRS), per NBC News.
What this means: The updated rule won’t affect payment apps from a profitability standpoint—it just makes them provide tax documentation for more business users.
The opportunity: Players like PayPal and Cash App could use the new tax rule to their advantage by creating payment-adjacent tax services that help limit the friction some small businesses face during tax season—like Stripe’s tax offering.
Block already offers a free tax filing service through Cash App, but it could expand the offering to include fee-based products. Such value-added services could help boost revenues for peer-to-peer (P2P) payment providers as they work to bring in business users.
The bigger picture: The new tax rule underscores one of the biggest advantages that governments see with digital payments: traceability. Unlike cash payments, digital transactions can easily be tracked—and, in turn, easily taxed. By updating digital payment tax rules, governments can mitigate tax evasion.
Related content: Check out our “US Mobile Payments Forecast 2021” to learn how mobile payment providers are angling for merchant acquisitions in the P2P payments space.