IRS tax rules for Venmo, PayPal payments over $600

What you need to know if you received tax-free money through a cash app and still received a 1099-K.

UPDATE: On Friday, December 23, the IRS announced that it delayed a rule by a year, which would require payment apps like Venmo, PayPal, and Cash App to report certain transactions of more than $600 to the IRS. The original story continues as posted below:

Beginning January 1, 2022, people using payment apps like Venmo, PayPal, and Cash App will be required to report certain transactions with a total value of more than $600 to the Internal Revenue Service.

VERIFY viewer Cindi emailed us asking if this means reporting anything over $600 to the IRS. Social media is also talking about what needs to be reported by users of these apps.

THE QUESTION

Do all payment app transactions over $600 need to be reported to the IRS?

THE SOURCES

THE ANSWER

That's wrong.

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No, not all payment app transactions over $600 are required to be reported to the IRS. Income must be reported, but you may need to show that a transaction was not income if you receive a 1099-K.

WHAT WE FOUND

user of Third Party Applicationssuch as Cash App, Venmo, or PayPal, are only required to report transactions over $600 to the Internal Revenue Service (IRS) for revenue that would normally be reported anyway.

For example, if you accepted an app payment of $600 or more for a service or product, that would be considered taxable income. Transactions with friends and family, such as rent payments or dinner refunds, are not taxable income.

Each respective payment app sends an IRS 1099-K forma form for reporting taxable earnings paid through third-party apps to users if they’ve earned more than $600 in revenue from the app.

More from VERIFY: Yes, cash app users will receive a 1099 if annual commercial payments are over $600

That’s what the tax office says If you receive one of these forms, but the money you receive doesn’t count as income, you’ll need to contact the payments app for a fix.

“Remember that money received from friends and family through third-party payment applications as personal gifts or reimbursements for personal expenses is not taxable. Those who receive one 1099-K that reflect income they did not earn should call the issuer. The IRS can’t correct it,” the agency’s website reads.

According to PayPal websitethe company provides a list of transactions that it includes in the calculation of total gross sales for goods or services. This reconciliation report is provided in the user’s PayPal account under the “Tax Documents” section.

If corrections need to be made or items in the report need to be disputed, the user must contact PayPal directly.

“Tell us the transactions you did not receive for the sale of goods or services. We need the specific transaction IDs for each payment, which you don’t think we should include,” PayPal says.

“We do not report payments such as B. Personal payments to family or friends. ‘ the site adds.

PayPal then examines the transactions to ensure they are not business related and issues new forms after verification.

PayPal owns Venmo, so they Process for this app is similar. Venmo issues tax documents electronically and if someone needs to request an update to their tax form, they must do so Contact Venmo directly to make changes.

cash app says 1099-K forms are only sent to users with Cash for Business accounts, which means that if you have a personal Cash App account, you will not receive a 1099-K and therefore “Cash App will not report any of your personal transactions on the IRS.”

According to a blog post by Intuit’s TurboTax, if someone doesn’t realize their 1099-K form was wrong and still files their taxes as usual, they can file an amended tax return. The IRS requires a letter of explanation stating which of the transactions were personal and not income.

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https://www.kvue.com/article/news/verify/taxes-verify/not-all-payment-app-transactions-of-600-need-to-be-reported-to-the-irs/536-faac3b46-5bb7-47ec-aafa-1788d7097415 IRS tax rules for Venmo, PayPal payments over $600

Laura Coffey

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