Treasury proposal would not levy new tax on PayPal, Venmo
The claim: Borrowed funds over $ 600, deposited through smartphone apps, would be taxed under a new bill
A Treasury Department proposal to curb tax evasion has been the subject of misinformation online.
A Facebook post claims the “new tax bill” would tax transactions over $ 600 on smartphone apps like PayPal and Venmo.
“This means if you borrow money using any of these things over $ 600, that money will be taxed again,” read the September 20 post, which was shared over 1 300 times in four days. “Do you know who deposits $ 600 or more into their bank account from outside sources to help them survive?” The poor and the middle class.
The Treasury proposal would change the reporting requirements to account for transactions made on smartphone apps. But the claim that he is levying new taxes is false.
Following:Don’t Fall For This Scam As IRS Child Tax Credit Payments Hit Bank Accounts
“It appears that (the proposal) simply extends the requirement to report transactions over $ 600 to more entities,” Karen Brown, professor of tax law at George Washington University, told USA TODAY in a report. -mail. “This puts these bank substitutes in the same position as the others. This is clearly an anti-tax avoidance measure. “
The proposal does not suggest a new tax
The Facebook post misinterprets a Treasury proposal that suggests expanding financial reporting to “improve tax compliance.”
In May, the Treasury proposed requiring financial institutions to report annual inflows and outflows of most bank, loan and investment accounts to the Internal Revenue Service. The requirement applies to accounts with $ 600 in and out, including paychecks and transactions made through smartphone apps. Details of individual transactions would not be reported.
The proposal is an effort to reduce the country’s annual tax gap – the difference between taxes owed and taxes paid – which the IRS estimates at around $ 166 billion a year. He is not proposing to levy a new tax.
“First of all, the proposal does not change what is taxable at all. It does not allow the Treasury to expand what is taxable at all,” said David Super, professor of tax law at Georgetown University, to USA TODAY in an email. “Second, the proposal does not specify which particular reporting standards would be adopted.”
The claim that the borrowed money would be taxed is also absurd. Personal loans are not considered income and can only be taxed if they are canceled, according to Investopedia.
“The claim that borrowing money will be subject to tax is false: the loan proceeds have never been income and therefore have never been taxable,” Super said.
“It is absolutely wrong that the poor or anyone is taxed on borrowing money,” Brown said. “It is the epitome of our tax system. Borrowed funds are not subject to tax due to the borrower’s compensatory repayment obligation.
Joey Gates, the Facebook user who shared the claim, told USA TODAY in a Facebook post that, “Whether or not I have a misunderstanding about the tax proposal, it is baffling to me that more money is coming. collected from taxpayers while we leave billions of dollars in taxpayer dollars (in) Afghanistan. “
Our rating: False
Based on our research, we are evaluating FALSE the claim that borrowed funds over $ 600, deposited through smartphone apps, would be taxed under a new proposal. A Treasury proposal would require financial institutions to report annual inflows and outflows, including transactions on smartphone apps, for most bank, loan and investment accounts. But that would not create additional tax on those funds. Personal loans are not considered income, so they can only be taxed if they are canceled.
Our sources of fact-checking:
Thank you for supporting our journalism. You can subscribe to our print edition, ad-free app, or e-newspaper replica here.
Our fact-checking work is supported in part by a grant from Facebook.