The new IRS rules that went into place at the start of 2022 authorize the IRS to monitor certain transactions through cash apps. According to the new rules, services like Paypal and Square will now require your tax information, making small businesses prone to new scams.
Rise in Frauds Possible from New IRS Rules?
The new IRS rules are put into place to allow the IRS to take a closer look at commercial cash application transactions of $600 or more. The change will primarily affect businesses that receive payments through one of the cash apps: Paypal, Venmo (owned by PayPal), or Square. It also includes online transactions made through marketplaces, such as Amazon or Etsy. Under the new rules, the payment service is required to send the report to the IRS and to you through a Form 1099-K, regardless of how many customers are paying.
However, with this change, it is suspected that a lot more businesses are likely to get scammed.
The new tax reporting requirements have put small businesses and thousands of freelancers at the risk of scams. To properly file these forms, these service providers need tax information from businesses. If they fail to report, they are required to withhold 24% of the payment and remit it to the IRS.
Services like Paypal and Square will now ask for your tax information, including Tax ID or Social Security Number, to continue using your account. This is a prerequisite for customers to continue using their accounts and access the services and features of these providers.
This places small businesses at risk of the hand of scammers who can now send fake texts and emails to ask for such details, which may seem genuine but would direct you to a fake website. This means that your personal security is at risk to this new requirement.
IRS guidelines will not protect small businesses against scammers pretending to be PayPal, Square, or other service providers.
Personal Security – Protect Yourself!
Be extra vigilant while visiting the websites of your payment service providers and updating your information. Also, train your personnel to ignore emails or texts from unknown senders and report any suspicious requests. Finally, make sure to submit any information directly on the payment provider’s website and avoid any links.