The IRS has introduced a major change in tax reporting for digital income, effective for the 2024 tax year. If you earn over $5000 through platforms like PayPal, Venmo, or other digital payment services, you’ll need to report this income when filing taxes in 2025.
This change aims to improve transparency and ensure all taxable income is properly accounted for, as digital transactions become more common.
Key Changes
Here’s what you need to know about the updated rule:
1. New $5000 Reporting Requirement
- If you earn over $5000 from digital payments, you must report it to the IRS.
- This applies to sales of goods, services, freelance work, and side gigs.
2. Expanded Oversight on Digital Income
- The regulation covers a wide range of online transactions.
- The IRS is adapting to modern digital commerce and new ways people earn money online.
3. Increase from the Previous $600 Threshold
- Previously, digital payments had to be reported only if they exceeded $600.
- The new $5000 threshold marks a major shift in how online earnings are monitored.
How This Affects Taxpayers
If you use digital payment platforms for income, here’s what this rule means for you:
- Keep detailed records of transactions, including invoices and receipts.
- Report all earnings over $5000 when filing your 2024 tax return in 2025.
- Failing to report could lead to penalties or interest on unpaid taxes.
Tax Filing Deadlines
- The U.S. tax deadline is Tuesday, April 15, 2025.
- Americans living abroad have until June 16, 2025, to file.
This change highlights the IRS’s effort to regulate digital income, so if you earn money online, be sure to track your earnings and report correctly to avoid any issues.
FAQs
What is the new IRS reporting rule for 2024?
Anyone earning over $5000 through digital payments must report it to the IRS.
Which payment platforms are affected?
Platforms like PayPal, Venmo, Cash App, and other digital services.
When do I need to report my digital income?
You must report it when filing your 2024 tax return in early 2025.
What happens if I don’t report my income?
Failing to report could result in penalties and interest on unpaid taxes.
When is the 2025 tax deadline?
April 15, 2025, for U.S. residents; June 16, 2025, for those abroad.