MICHEL MARTIN, HOST:

If you are one of the millions of Americans who makes an income through gig work or a side hustle, you probably get paid through an app like Venmo or PayPal or Cash App. They make it easy to exchange money for services and products - no muss, no fuss - until now. Starting this year, the IRS is requiring third-party apps like the ones I just mentioned to report any income for goods and services that total $600 or more, and that'll probably have an effect on what's expected of these workers come tax season. And that's not all the financial news that could affect your budget. The stock market had a wild week, and interest rates are set to go up soon.

So with so much going on, we thought we'd call Michelle Singletary to try to point us in the right direction. She's the personal finance columnist for The Washington Post, and she's with us now. Welcome. Thank you so much for joining us.

MICHELLE SINGLETARY: Thank you for having me.

M MARTIN: So you recently wrote about this new reporting rule for The Washington Post, and we want to begin with how you define it in your piece. You say it's a new reporting requirement. It's not a new tax. So what exactly is it, and whom does it affect?

SINGLETARY: So the American Rescue Plan Act added reporting requirements for 1099-K. So that's the reporting requirement that - for, you know, gig workers, people who are self-employed. And so, you know, we've got a tax gap in this country, and so they're trying to make sure people report their income. And we know that when third parties report what we earn, then people tend to be honest and put it on their tax forms because there is accountability.

And so as part of, you know, fixing the tax gap, they put in this new requirement that if you make more than, you know, $600 or more, those apps that you mentioned have to send the information to the IRS. Before, the limit was way higher, like $20,000 and 200 transactions. So you can see for most people who are small business owners, entrepreneurs, gig workers, that - you know, the old reporting rules didn't cover that. However, they were always supposed to report their income. It just wasn't that reporting requirement.

And I think that's where a lot of the confusion comes out. Lots of people sort of think it's a new tax and that somehow, this is attacking those people who are trying to do - you know, trying to make money for themselves. But you were always supposed to be reporting your income to the IRS. This just has more accountability to it.

M MARTIN: So it's not about, like, splitting dinner with friends. It is about that Airbnb income. It is about your Etsy hustle, for example.

SINGLETARY: That's exactly right. You know, lots of people are concerned. Am I going to get a tax bill? No. If you are changing money between, like, you know - I have a sister, I might send her some money, or you're splitting that, you know, restaurant bill, or the - Grandma sent money, it doesn't apply to that. We're talking about business transactions.

M MARTIN: If people are not used to this and have not accommodated themselves to this, how should they change their, say, budgeting if they haven't gotten one of these 1099-K forms before or, frankly, were not in the habit of putting money aside? What do you recommend?

SINGLETARY: So let's say you've got a business and you're making, you know, a couple hundred dollars a month and you say, you know, you're spending this on all your, you know, personal expenses. When you get that income from your business or side hustle, you should automatically figure out what taxes you owe, put that money into a different account and, when it comes time to pay those estimated taxes - is it - four times a year, then you go ahead and make those payments. So you've got to become much more disciplined in your business dealings. Lots of people mix the business with their personal. And, you know, you put your business income in your personal account, and next thing you know, you've spent it. The tax money isn't there. So you've got to be even more disciplined.

And a lot of these platforms have business accounts. They'll help you with that. You know, definitely, if you - you should have a tax professional to help you out with this. You don't want to get in trouble with the IRS on this. You don't want to come next year when you file your taxes realizing you owe, you know, several thousand dollars in taxes, and you don't have that money.

M MARTIN: So let's talk about another story that may affect people's personal finances. Earlier this week, Federal Reserve Chairman Jerome Powell signaled that he plans to start raising interest rates in March. Now, this is going to affect what? People who already have a lot of debt or who are thinking about taking out a mortgage or other loans? If you're in that position, what should you be thinking about?

SINGLETARY: So if you're deep in debt, the Federal Reserve has just given you your financial resolution. Get out of debt because it's going to cost you more. If you have an ARM, an adjustable-rate mortgage, it's going to cost you more. If you're buying something, interest rates are going up. We already now see that mortgage rates are inching up. And so for example, if you were thinking about it, you might want to refinance. And all the numbers work because you got to make sure the numbers work. I would say refinance now before the rates go up.

Most importantly, if you are in credit card debt, if you're not paying off that credit card bill every single month, just make that your No. 1 priority because that debt is going to cost you more. It's already cost you a lot. The average interest rate on a credit card is between 16 to 17%, and some people, it's, you know, 20, 29%. And even going up a couple of, you know, percentage points, it's going to cost you money over time if you keep that debt hanging around like it's a pet.

M MARTIN: Final big story - the stock market had a wild week, and this may make people nervous, especially people who have money tied up in the stock market for retirement accounts, which is probably the way most people do, right? So is there something that you suggest that people do right now if they're looking at these numbers and it's kind of making their stomach hurt?

SINGLETARY: If you've got time till retirement, you know, weather this storm. Now, if you're nearing retirement and you were heavily invested in equities, then you probably should be a little worried because this is money that you need now. You know, I talked to quite a few experts, financial experts, financial planners, and they said, listen, you got - you know, if you retire in your 60s, it's very likely you're going to live another 20, 30 years, so you need to have your money grow. So it's OK to have it in equities, but you also need to have a pile of money that isn't in the market, that isn't tied to these turbulent times so that you can pull from that money when we have times like this, when the market is see-sawing up and down.

M MARTIN: That is Michelle Singletary. She's the personal finance columnist for The Washington Post. Her latest book is "What To Do With Your Money When Crisis Hits: A Survival Guide." Michelle Singletary, thank you so much for being with us.

SINGLETARY: Thank you for having me. Transcript provided by NPR, Copyright NPR.