IRS Delays Requiring Venmo, Cash App and Other Payment Apps To Report Payments Of $600 Or More (2024)

Payment apps such as Cash App and Venmo have been given extra time to implement a change that will require them to report more consumer payment information to the IRS.

The current law requires the companies to report payments if they’re in the tens of thousands of dollars, and if numerous transactions are completed during the year.

A 2021 law called for revising the tax reporting requirements for the apps, which are formally known as third-party settlement organizations. Under the law, the apps were supposed to send users a Form 1099-K—“Payment Card and Third Party Network Transactions”—for transactions of as little as $600 for payment of goods and services during the 2022 tax year.

However, the IRS announced late in 2022 that it would delay the new lower reporting requirements until the 2024 tax filing season.

The IRS cited taxpayer confusion and a lack of guidance available to the public as reasons for the delay. The agency has decided to use the next tax year as a transition period to develop information to help taxpayers comply with the new requirements.

Here’s how the new tax reporting will work when it’s implemented next year.

New Tax Reporting for App Payments $600 or More

Under the current law, the IRS requires third-party settlement organizations to issue Form 1099-K to report certain payment transactions that meet both of these reporting thresholds:

• Gross payments that exceed $20,000
• More than 200 transactions within the year

The new law would require users to receive Form 1099-K for any payments of goods and services over $600, regardless of the number of transactions. That means more people will receive the forms.

Understanding Your Form 1099-K for Payment Apps Reporting

You will receive by January 31 of each year a Form 1099-K from third-party networks or financial institutions for income you got via the platforms during the prior year.

Your third-party provider may request additional information from you to properly report your transactions on the Form 1099-K. You may be asked to provide your employer identification number (EIN), individual tax identification number (ITIN) or Social Security number if this information is not on file.

Your Form 1099-K will report in Box 1a the total gross income received during the year, without considering any adjustments, discounts or refunds.

Your Form 1099-K will include payments from credit cards and online payments. You are required to report any income listed on your Form 1099-K from your business on your income tax return.

Do Venmo, CashApp and Other Third-Party Network Users Have To Pay a New Tax?

No.

While the 2021 law requires new tax reporting requirements, it does not change the existing tax law on whether certain income payments are taxable.

In the event your Form 1099-K includes amounts considered nontaxable, you won’t need to report them on your tax return.

However, you may want to ensure your payments are properly classified within the third-party platform. If you receive money for something other than goods or services, you should be able to classify the transaction correctly to avoid receiving a Form 1099-K for personal transactions.

Some examples of payments that may be excluded from your income include:

• A reimbursem*nt from a friend or family member
• Your roommate’s share of the rent on your apartment
• A gift from a loved one

Also, if you receive money from selling a personal item at a loss, you are not required to report the amount on your tax return. For example, if you purchased a dress for $100 and sold it for $50, there’s no tax.

Note that the money-transfer tool Zelle has said none of its payments are subject to the new requirements.

The law says only third-party payment companies that handle the settlement of funds (a process of transferring funds from a buyer to a seller in a transaction) are required to send 1099-K forms to users.

Early Warning Services LLC, the network operator of Zelle, said in an email statement that Zelle doesn’t settle funds but rather provides messaging between a financial institution and people making payments.

How To Keep Good Records for Form 1099-K Reporting

Since your Form 1099-K may include both taxable and nontaxable income, keeping good records is essential.

While you may choose any recordkeeping system for your business, you want to select a system that reflects your income and expenses. Your system should include:

• Accounting and payroll records
• Bank statements
• Receipts
• Tax forms and returns
• Other business financial records

You can consider saving your records either in electronic form or on paper.

If you are a business owner, it’s a good idea to set up a separate third-party platform for business and personal transactions. That way, you can easily track business transactions.

Also, setting up a separate business third-party payment platform and keeping good records can be beneficial to prove both taxable and nontaxable income sources if the IRS audits your tax return.