Do I have to pay taxes on my Venmo, Cash App or PayPal transactions?
How the IRS treats payment apps like Venmo or Cash App for tax purposes can be confusing. Here's what you need to know about declaring your transactions in 2024.
Determining Factors for Tax Declarations
For most people, how they use payment apps like Venmo or Cash App will determine whether they need to report their transactions to the IRS. Tax attorney Adam Brewer explains that if you received business income through the app, you should report it to the IRS. However, if a friend reimbursed you for personal expenses or you received non-business-related payments, you don't need to expect a Form 1099-K.
It's important to note that simply receiving a Form 1099-K is not the only requirement for paying taxes on payment app income. Even if you don't receive this form, if you received business income through Venmo, Cash App, or similar apps, you are still obligated to report that income to the IRS.
Overall, how you use payment apps and the nature of your transactions will ultimately determine your tax obligations.
Thresholds and Reporting Rules
The IRS had announced new rules requiring the reporting of transactions over $600 using Form 1099-K. However, this rule has been delayed, and the old threshold of at least 200 transactions worth more than $20,000 will apply when filing taxes in 2024. This decision was made to reduce confusion among taxpayers.
It's important to note that at the state level, reporting thresholds may be different. For example, in Maryland, Massachusetts, Vermont, Virginia, and Illinois, the reporting thresholds for payment app transactions may be lower. Additionally, starting in tax year 2024, the IRS will transition to a $5,000 threshold, with the $600 limit for reporting going into effect the following year.
Business Income and Reporting Requirements
For small business owners and individuals with side hustles who rely on payment apps for their income, the tax obligations can be more complex. If you receive business income through Venmo, Cash App, or similar platforms, you are required to report that income to the IRS, regardless of whether you receive a Form 1099-K.
It's essential to understand your reporting requirements and consult with a tax professional if you have any doubts or questions about how to properly report your income from payment apps.
