Cash App, Venmo, Booksy

In the world of barbering, cash has long been king. But as the industry spirals deeper into the digital age, third-party payment processors like CashApp, Venmo, Zelle, and PayPal have become the new royalty. However, this convenient tool comes with a catch – one that's making financial management and tax filings a lot trickier for shop owners, school instructors, booth renters and suite leasers.

Third-party payment processors are becoming more and more strict on requiring users to provide either an Employer Identification Number (EIN) or Social Security Number (SSN) to create or maintain an account. This isn't just a formality – it's the IRS tightening its grip on the digital economy.

These payment processors are required by law to report your earnings to the IRS via Form 1099-K. This form is like a tattoo on your financial arm – permanent and very visible to the taxman. 

How does it work? Let's break it down: 

1. You accept payments through a digital platform. 
2. The platform keeps track of your transactions.
3. If you meet certain thresholds (more on that later), the platform sends a 1099-K to both you and the IRS. 
4. The IRS now has a record of your income, whether you report it or not. 

It's like having a reality tv show of your finances and the IRS tunes in every night at 8:00pm.

Now, you might be thinking, "So what if they know? I'll just... not file taxes." Hold that thought. 

When your SSN or EIN is linked to an account, it's like leaving a trail of hair clippings right to your door. The IRS's algorithms are getting smarter by the day, and they're excellent at connecting dots. 

*If You Don't Know Now You Know: The IRS generally has three years from the date you file your return to audit you. But don't get too comfortable – this period can be extended to six years in certain cases. For instance, if you underreport your income by more than 25% of the gross income shown on your return, the IRS gets an extra three years to take a closer look at your finances. 

And if you think you can outsmart the system by not filing at all? Think again. For non-filers, there's no time limit. The IRS can come knocking at any time, and trust us, they're patient - allowing interest and penalties to pile up, so by the time they come knocking, that unpaid tax bill could look more like a small mortgage. 

The point is this: While you might not see immediate consequences, remember that the IRS plays the long game. Those unpaid taxes could be silently accruing interest and penalties, turning a manageable sum into a financial nightmare down the road.

It's like letting a bad haircut grow out – it only gets worse with time.

For those who use booking platforms, it's even easier for the IRS to track your income. Most booking platforms like Squire, TheCut, Booksy, Vagaro, StyleSeat, Gloss Genius, and Square are built on third-party payment processors (most commonly Stripe). So if you're using these to book clients and accept payments, you're already in the system. The IRS doesn't need to be Sherlock Holmes to figure out your income – it's all there in black and white.

Lastly, as if federal reporting wasn't enough, states are getting in on the action too. The thresholds are constantly changing per state and is usually lower than the federal threshold which is $5,000. This means if you make more than $5,000 per year using these third-party payment processors – you're either in the system or will be soon enough. 

*For a full state-by-state table breakdown text "table" to 888.572.2017<

Episode Transcript

(00:00):
Cash App, Venmo, Booksy.

(00:03):
In the world of barbering, cashhas long been king.
But as the industry spiralsdeeper into the digital age,
third party payment processorslike Cash App, Venmo, Zelle, and
PayPal have become the newroyalty.
However, this convenient toolcomes with a catch.
One that's making financialmanagement and tax filings a lot

(00:25):
trickier for shop owners, schoolinstructors, booth renters, and
suite leasers.
Remember when you could justslap a cash only sign on your
mirror and call it a day?
Those times are fading fasterthan a bad dye job.
Third party payment processesare becoming more and more
strict on requiring users toprovide either an employer
identification number or socialsecurity number to create or

(00:48):
maintain an account.
This isn't just a formality,it's the IRS tightening its grip
on the digital economy.
These payment processes arerequired by law to report your
earnings to the IRS via Form1099 K.
This form is like a tattoo onyour financial arm, permanent
and very visible to the tax man.

(01:10):
So how does it work?
Let's break it down.
One, you accept payments througha digital platform.
Two, the platform keeps track ofyour transactions.
Three, if you meet certainthresholds, more on that later,
the platform sends a 1099 K toboth you and the IRS.
And then four, the IRS now has arecord of your income.

(01:32):
Whether you report it or not.
It's like having a reality TVshow of your finances and the
IRS tunes in every night at 8pm.
Now you might be thinking, sowhat if they know?
I'll just not file taxes.
Well hold that thought, Whenyour social security number or
employment identification numberis linked to an account, is

(01:55):
leaving a trail of hairclippings right to your door.
The IRS's algorithms are gettingsmarter by the day and they're
excellent at connecting dots.
If you don't know, now you know.
The IRS generally has threeyears from the date you file
your return to audit you, butdon't get too comfortable.
This period can be extended tosix years in certain cases.

(02:17):
For instance, if you underreportyour income by more than 25
percent of the gross incomeshown on your most recent tax
return, the IRS gets an extrathree years to take a closer
look at your finances.
And if you think you canoutsmart the system by not
filing at all.
For non filers, there's no timelimit.

(02:39):
The IRS can literally comeknocking at any time allowing
interest and penalties to pileup.
So by the time they comeknocking, that unpaid tax bill
could look more like a smallmortgage.
The point is this, while youmight not see immediate
consequences, remember that theIRS plays the long game.
Those unpaid taxes could besilently accruing interest and

(03:02):
penalties, turning a manageablesum into a financial nightmare
down the road.
It's like letting the badhaircut grow out.
It only gets worse with time.
For those who use bookingplatforms, it's even easier for
the IRS to track your income.
Most booking platforms likeStyleSeek, GlossyGenius, and

(03:23):
Square are built on third partypayment processors, most
commonly Stripe.
So if you're using these to bookclients and accept payments,
you're already in the system.
The IRS doesn't need to beSherlock Holmes to figure out
your income.
It's all there in black andwhite.
Lastly, as if federal reportingwasn't enough, States are

(03:45):
getting in on the action too.
The thresholds are constantlychanging per state, and it's
usually lower than the federalthreshold, which is 5, 000.
This means if you make more than5, 000, per year using these
third party payment processes,you're either in the system or
will be soon enough.

(04:06):
Let's take a look at a coupleexamples.
North Carolina is a 600threshold and has same filing
date as the IRS.
South Carolina essentially hasto follow the same IRS
threshold, which is 5, 000 andthe same filing date as the IRS.
Virginia is 600 threshold andit's due by April 30th.
Georgia follows the same IRSthreshold.

(04:28):
So it's 5, 000 and their filingdate.
And then Louisiana is the samefollowing the 5, 000 IRS
threshold and the same filingdate as the IRS.
For a full state by state tablebreakdown, text table is T a B L
E.
To 888 572 2017.
That's 888 572 2017.

(04:51):
Listen, the days of flying underthe radar are coming to an end.
Third party payment processesare becoming the IRS's eyes and
ears in the digital economy.
If you're a barber who's beenplaying fast and loose with your
financial management and taxes,it's time to clean up your act.
Here's what you need to do.
Get your EIN if you don'talready have one so you're not

(05:12):
directly using your socialsecurity number.
Keep meticulous records of allyour income, expenses, digital
or otherwise.
Consider working withspecialists like RTS Barbers,
not generalists like majority ofaccountants, CPAs, and business
consultants.
Listen, we understand the uniqueregulations of business and

(05:33):
taxes, yet we also have takenthe time to understand how it
connects specifically to yourindustry.
Trust us, you want specialists,not generalists.
And then lastly, continuelearning from other sources and
reading our blogs so you stayinformed about changes in tax
laws and reporting requirements.
Remember, it's not just aboutavoiding trouble with the IRS.

(05:56):
Proper financial management andtax compliance can open doors to
free money like business grants,business loans, home mortgages,
commercial lending, and otheropportunities that require proof
of income.
The scissors are in your hands.
Will you use them to cut yourfinancial future short or to
shape it into something amazing?

(06:17):
The choice is yours, but theclock is ticking.
Don't let the IRS give you ahaircut you can't style your way
out of.
your move, boss.