Fact Check

Are Biden and Dems Planning to 'Spy' on Bank and Cash App Accounts?

Social media posts mischaracterized how the American Rescue Plan will affect users of cash apps like Venmo.

Published Dec 21, 2021

UKRAINE - 2021/02/15: In this photo illustration, Venmo logo, a mobile payment service of Paypal is seen displayed on a smartphone and a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
Image Via Pavlo Gonchar/SOPA Images/LightRocket via Getty Images
The Biden administration will begin "spying" on bank and cash app accounts starting Jan. 1, 2022.

Various social media posts circulating in late December 2021 claimed that thanks to coronavirus stimulus legislation known as the American Rescue Plan, U.S. President Joe Biden's administration and Democratic legislators would begin "spying" or "snooping" on users of cash apps like PayPal and Venmo. Here is an example of one such post:

The truth is, unsurprisingly, more nuanced, but the bottom line is that, contrary to what the above Twitter posts state, the effect of the legislation in question isn't that the Biden administration or Democrats will be "tapping into" or "spying on" bank or cash app accounts. This is a misleading characterization.

What the legislation does is significantly lower the threshold for reporting taxable transactions made using cash apps like Venmo, PayPal, or Zelle for goods and services to the IRS. And when you reach that threshold, the app companies will then be required to send a tax form called a 1099-K to both you and the IRS.

A 1099-K is, according to PayPal, an "informational tax form that is used to report goods and services payments received by a business or individual in the calendar year."

As of this writing, the current threshold for such reporting is $20,000 and 200 payments in goods and services. Come Jan. 1, 2022, that reporting threshold will drop down to $600.

This could have a significant impact on platform users' tax returns. Here's how Bloomberg Tax described how users might experience the change:

For example, a model train collector may have paid $5,000 for model train pieces over several years that they now sell for $8,000, and the marketplace that introduced the seller to the buyer and through which the sale took place may charge the seller a total fee of $800. It may cost the model train seller $200 in postage to send the pieces to its buyers. The Form 1099-K that the seller will receive from the TPSO will report $8,000 in gross proceeds paid. However, the seller’s taxable gain from that sale would only be $2,000. As a result, collectors and other online sellers will need to keep extensive records of their expenses going forward to avoid over-reporting of income and overpayment of tax.

Also, consider the alternative—a teenager who walks dogs to earn extra money. If their income in 2022 exceeds $600, their expenses may be limited to the fees charged by the website that connects them to pet owners, but they will owe income tax—and possibly self-employment tax—on the income they earn.

According to PayPal, which owns Venmo, the change doesn't affect people who use the apps for personal transactions, like paying a friend back for your share of dinner, gifts, or chipping in for trips. PayPal also states that its app allows users to categorize their own transactions as personal versus rendering payment for "goods and services."


“Business Users on Cash Apps Will Begin Receiving Tax Forms. Here’s What You Need to Know.” WJHL | Tri-Cities News & Weather, 14 Oct. 2021, https://www.wjhl.com/news/business-users-on-cash-apps-to-begin-receiving-tax-forms-what-you-need-to-know/.

Pflieger, Deborah. "New Form 1099 Reporting Coming in 2022," Bloomberg Tax, 15 Dec. 2021, https://news.bloombergtax.com/tax-insights-and-commentary/new-form-1099-reporting-coming-in-2022.

“New U.S. Tax Reporting Requirements: Your Questions Answered.” PayPal Newsroom, 4 Nov. 2021, https://newsroom.paypal-corp.com/2021-11-04-New-US-Tax-Reporting-Requirements-Your-Questions-Answered.

"PayPal and Venmo Taxes: What You Need to Know About P2P Platforms." TurboTax, 27 Nov. 2021, https://turbotax.intuit.com/tax-tips/self-employment-taxes/paypal-and-venmo-taxes-what-you-need-to-know-about-p2p-platforms/L5DNjOUM1.

Bethania Palma is a journalist from the Los Angeles area who started her career as a daily newspaper reporter and has covered everything from crime to government to national politics. She has written for ... read more