- When a bank, payment processor, finance company, cash app company, mortgage company, attorney, settlement agent, etc., reports a transaction to the IRS and/or a state revenue department, THIS DOES NOT MAKE THE AMOUNT REPORTED TAXABLE INCOME.
- There is NO CHANGE IN FEDERAL OR STATE TAX LAW in 2022 that changes the taxability of any transaction, whether reported to a tax authority or not.
- Any transaction that was taxable before 2022 is still taxable now. Anything that was not taxable before 2022 is still not taxable.
- There is NO CHANGE in what you are required to report or not report on your tax return for 2022.
- If you are illegally underreporting your taxable income, this is a separate matter not covered in this blog post that I recommend that you should discuss with a qualified tax adviser, but I strongly suggest that you DO NOT DISCUSS THIS ON SOCIAL MEDIA.
Sadly, 2022 began with a blitz of social media misinformation surrounding this topic. Those who are served by competent tax advisers were likely not affected by the confusion but I already see the potential for millions of low information taxpayers and, regrettably, their tax “professionals” with lower levels of understanding of tax law to be harmed by the misinformation.
Yesterday a well-qualified CPA professional tax writer published an article in a major national newspaper that was widely misunderstood. In my opinion, he should have more clearly addressed the potential for misunderstanding of his article. I’m not calling out this writer as a matter of professional respect and personal relationship. In this case the publisher solicits public donations for its work, and I presume, but do not know, that the author shares in the benefit of increased circulation of the article. Publishing these types of provocative articles serves their interests of the publisher and writer at the expense of the taxpaying public. Sadly, we see an increasing number of examples where a writer and his publisher benefit from the viral hysteria of misinformation in social media where this inherent conflict of interest exists. See my recent post on 2021 tax misinformation.
Consider also the probability that current law is not likely to be final effective law in this matter but that any further discussion on this topic at this time would be speculative – which is not the purpose of this blog post.
* This blog post does not cover what is and what is not taxable income and what does and what does not need to be reported on your tax return, nor provide advice as to what to do if you have underreported your taxable income. This post only addresses the misinformation that is currently being spread to the public primarily on social media.