Payment Apps like Venmo Reporting $600 payments

What happened?

The American Rescue Plan, which was signed in March 2021, introduced this change. This is because the IRS realized that people who used payment apps like Venmo or Cash App were trying to avoid paying their taxes.

Payment aps are considered third party payment network providers. This meant that the IRS only expected them to report accounts which met both of the following two requirements:

• Make more than  transactions in the tax year
• Gross payments must exceed $20,000

With such relaxed standards, of course people started to utilize payment apps more and more! Unfortunately, those days are gone. Keep good records of your transactions and consult with a tax professional. The IRS has made payment apps a lot more regulated.

What are payment apps doing?

Beginning January 1, 2022, payment network providers will be required to send users a Form 1099-K for any of their transactions. This means that the impact on your tax statement is going to impact your 2022 tax return, which you file in 2023. There is still a bit of time before things really get going.

You can expect the IRS to require payment apps to request additional information from you in order to properly report your transactions. These transactions include payments from credit cards, debit cards, and crypto if the platform supports such payments.

Basically, if you are doing business over a payment app, and gross profit is exceeding $600 per year, then you ought to expect a Form 1099-K heading your way next tax year.

Other taxable events include wages, rents, tips, and retirement income.

I only use payment apps casually. Will I be taxed?

A great deal of the people who use these third party payment networks like Venmo and Cash App don’t use them for business. In fact, the most common use of these payment apps are:

• Repaying friends or family
• Transferring money to pay a share of rent
• Getting money from friends, family, or third parties as a gift

Thankfully, all of these actions are non-taxable. In fact, the IRS considers gift giving to be a positive thing. If you are giving a gift to a qualified 501(c)(3) nonprofit organization, then the gift is actually tax deductible! If you are just giving gifts to friends and family, it will not be taxed so long as it does not exceed $15,000 that tax year. This is the federal gift tax.

Speaking to a tax professional may shine some light on how all of these different topics fit together. A pro can even help you learn how to set yourself up for a smaller tax bill. Connect with one now.