Venmo 600.00: Understanding the New Tax Reporting Rule

The IRS has introduced a new tax reporting rule for Venmo transactions, requiring users to report payments and fees exceeding $600 in a calendar year. This rule affects Venmo users who receive payments for goods and services.

If you're a Venmo user who earns more than $600 from transactions, you'll receive a Form 1099-K from Venmo, which will report the total amount of payments you received. This form is typically sent by January 31st of each year.

Venmo will also provide a breakdown of the payments and fees on the 1099-K form. This includes the total amount of payments, fees, and any other relevant information. The IRS will use this information to determine your tax liability.

As a result, you'll need to report this income on your tax return and pay any applicable taxes.

The $600 rule is a new threshold for reporting income on payment apps, lowered from $20,000 and 200 transactions annually to $600 for a single transaction in 2021.

This change is being phased in over the next three years, with different minimums for each tax year.

Here's a breakdown of the phase-in schedule:

Regardless of the amount, funds received via a payment app for selling goods, providing services, or renting property must be reported to the IRS.

If you receive a 1099-K form, you might wonder who sent it to you. According to the IRS, third-party payment networks that may send you a 1099-K include peer-to-peer payment platforms like PayPal and Venmo, ride-hailing apps like Uber and Lyft, and online marketplaces like eBay or Shopify.

These platforms are required to send out 1099-K forms if the total payment amount exceeds $600 in a calendar year. This rule applies to a wide range of services, including freelance work, craft sales, and crowdfunding.

Some popular platforms that may send you a 1099-K include:

It's worth noting that Zelle, a popular payment service, is exempt from the 1099-K requirement. This is because Zelle directly connects accounts from major banks, rather than taking possession of money.

You'll now need to report payments of $600 or more through third-party payment networks like Venmo, Cash App, or Zelle to the IRS.

The IRS is cracking down on these apps to ensure everyone pays their fair share of taxes.

Payments of $600 or more for goods and services will be reported to the IRS, but personal transactions are exempt.

You'll receive a Form 1099-K by mail or electronically for transactions made through these networks.

This new tax reporting requirement will impact your 2022 tax return filed in 2023.

To avoid confusion, consider separating your personal and business accounts, especially if you're a small business owner.

Dr. Steven Gill recommends creating a separate business account to keep your personal and business expenses organized.

Here's a quick summary of the key points to keep in mind:

The IRS Reporting Rule has been delayed, and it's a relief for many Venmo and PayPal users. The rule change would have required people to report income over $600 paid through popular apps like Venmo and PayPal, but now it's being phased in over two years.

The IRS will treat 2023 as an additional transition year to reduce potential confusion about the new tax obligation. This means users of third-party payment apps will not be required to fill out 1099-K's in 2023 unless they received over $20,000 in income and engaged in more than 200 transactions.

The new rule only applies to payments received for goods and services transactions, not personal transactions like birthday or holiday gifts. Reporting requirements do not apply to casual online sellers and microbusinesses.

The IRS is planning for a threshold of $5,000 for tax year 2024, and will presumably implement the $600 reporting threshold in tax year 2025. This phased-in approach is meant to prevent unnecessary confusion and avoid problems for taxpayers, tax professionals, and others.

Users may be asked to provide their Employer Identification Number (EIN), Individual Tax Identification Number (ITIN), or Social Security Number (SSN) if it's not already on file.

Venmo, along with PayPal, is now required to report business transactions above $600 to the IRS. This change is a result of new IRS regulations.

If you use Venmo for business purposes, you can expect to receive a 1099-K form from them, which will report your transactions to the IRS. This form will list the total amount of payments you received through Venmo.

To comply with the new regulations, Venmo may request additional information from users, such as an Employer Identification Number (EIN), Individual Tax Identification Number (ITIN), or Social Security Number (SSN) if it's not already on file.

You'll want to make sure your account information is up to date to avoid any issues with reporting your business income to the IRS.

Here's a list of third-party payment networks that may send you a 1099-K, according to the IRS's Taxpayer Advocate Service:

One important note is that Zelle, a popular payment service, is exempt from the 1099-K requirement because it doesn't take possession of money, it just moves it in and out of accounts.