Are you making money with the Venmo, PayPal, or the Cash app? Here’s why I received the 1099-K
If you’re a freelancer, business owner, or someone Sometimes I make money on the sidelinesyou need to know about new tax reporting requirements for PayPal, Venmo, Cash apps and other third-party payment apps.
The IRS requires you to send to a third-party payment app 1099-K Tax Form If you made more than $5,000 on the platform in 2024. This change in reporting will give the IRS a clear understanding of how much they earned from tax revenue this year in order to properly pay taxes. For the 2025 tax year, the threshold drops to $2,500.
“The taxation and tax processing requirements for taxpayers have not changed,” said Mark Staber, Jackson Hewitt’s Chief Tax Information Officer. “This income is always considered taxable by the IRS and should be reported on your tax return.”
If you make money Freelance or self-employed incomeyou’re probably not a stranger 1099 Tax Form. I need to report something Net profit is over $400 To the IRS when you’re there File your tax returneven if you haven’t received 1099. The 1099-K tax change places reporting requirements on payment apps, so the IRS can maintain a better tab on revenues that would otherwise not be reported.
The new 1099-K Tax Reporting Rules apply only to income earned from third-party payment apps. The IRS does not tax the money you send to your friends and family. There are everything else you need to know about the new 1099-K tax reporting changes.
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What is 1099-K?
a 1099-K is a tax form It reports income received through third-party payment platforms from non-permanent jobs, including tax-free side hustles, freelance contracts, contractor positions, and more.
IRS is currently required Third Party Payment Apps Like Cash App or Venmo, if you earn more than $20,000 in commercial payments on more than 200 transactions, you will send 1099-K to the IRS and individuals. If you regularly earn more than $20,000 on your freelance income, and are paid through Venmo and receive more than 200 transactions, you may have previously received a 1099-K tax form.
What is the 1099-K rule for the 2024 tax year?
Regarding taxes for 2024 (submitted in 2025), the IRS plans to deploy in stages, requiring payment apps to report freelancers and business owners More than $5,000 in revenue. “Before 2024, the revenue threshold was $20,000, a 200-person transaction to receive 1099-K tax documents,” Steber said.
Why was the IRS’ 1099-K tax rules delayed?
Originally planned to kick off at the beginning of 2022, the IRS had planned to implement new reporting rules that required third-party payment apps. PayPalVenmo or Cash app is a cash app for reporting income of over $600 a year. To the tax institution. The IRS delayed this new reporting requirement in 2022 and 2023.
why? It’s not always easy to distinguish between taxable and tax-free transactions through third-party apps. For example, the money your roommate sends to you through Benmo for dinner is not taxable, but the money you receive for a graphic design project may be. The late rollout allowed the payment platform to prepare more.
“We have collected feedback from third-party groups and other groups for months, but it has become increasingly clear that additional time is needed to effectively implement new reporting requirements. It was there.” November 2023 Statement.
Which payment apps send 1099-ks?
All third parties Payment App Freelancers and business owners will need to receive income to begin reporting transactions involved with the IRS in 2024. Some popular payment apps include PayPal, Venmo and Cash apps. Other platforms used by freelancers, such as Fivver and Upwork, are also available in the hook to begin reporting the payments they receive throughout the year.
If you earn income through the payment app, we recommend setting up a separate PayPal, Cash app, and Venmo account for professional transactions. This prevents money sent by family and friends from being accidentally included in 1099-K.
There is one popular payment app that is exempt from the 1099-K rule. Payment forwarding service Zel will not issue 1099-kswhether or not you receive business funds through the service. This is because Zelle doesn’t keep funds in your account like PayPal, Venmo, or Cash apps, and instead is used as a way to transfer money between bank accounts. If you are paid to a freelance or small business service through Zelle, it is your responsibility to report all your income on Schedule C on your tax return.
How do you submit 1099-K?
You are listed by submitting the income you earned to your 1099-K Schedule c (IRS form reporting profits or losses from the business). We will guide you to report your income if you submit using online tax software.
Be careful not to report your income in double terms. For example, if you earn $10,000 in freelance income from your client, you probably 1099-NEC Tax Form For compensation for non-employees detailing revenue. If the client pays via PayPal, they will also receive 1099-K from the payment app for the same revenue. You don’t need to report your revenue twice.
In many cases, if you don’t receive a tax certificate from your client, you can use 1099-K instead to make sure you’re reporting your full income. If you have income from multiple clients or are worried that 1099-K is incorrect, contact your accountant to check your tax return and income document before file.
Does the IRS tax money you send to family and friends?
no. Rumors have spread that the IRS is cracking down on money sent to family and friends through third-party payment apps, but that’s not true. Personal transactions that include gifts, favors, or refunds are not considered taxable. Some examples of tax-free transactions are:
- Money received from family as a holiday or birthday present
- Money received from a friend who covers part of the restaurant bill
- Money received from a roommate or partner for rent and utility share
Payments reported on 1099-K must be flagged as payments for goods or services from the vendor. If you select “Remit money to family or friends,” it will not appear in the tax form. In other words, money from roommates for half of the restaurant is safe.
“This is just self-employed income,” Staver said. “We should not receive 1099-K for personal transactions, but some platforms can incorrectly include 1099-K personal transactions and must be revised in your tax return. Please be careful about this.”
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Do the rules apply to items sold on Facebook or Poshmark?
If you sell your personal items for less than you paid and collect money via a third-party payment app, these changes will not affect you. For example, if you buy a sofa for your home for $500 and then later sell it on the Facebook market for $200, you won’t borrow taxes for the sale as it’s a personal item you’re selling. You may need to view the original purchase documentation to prove that you lost the item and sold it.
If you have a side job to buy items and resell them for profit via PayPal or Another digital payment appand subsequently revenues over $5,000 will be considered taxable and reported to the IRS in 2024. Keep a good record of purchases and online transactions to avoid paying taxes on non-purchasable income.
What happens if I accidentally receive Form 1099-K?
With tax season here, you could receive 1099-K for money that isn’t income. For example, if your roommate rents $1,000 a month with Venmo, then Venmo could send you 1099-K for $12,000. In this case, the IRS states that they should contact the payment platform and notify you of the error using the phone number in the bottom left corner of the form.
You will then need to issue the modified 1099-K. You can still file a tax return if there is no 1099-K revised before the tax return deadline. The IRS says Follow these three steps:
- Report amounts listed in Schedule 1, Part 1, Line 8Z: Other Income. List this as “Form 1099-K received by mistake” and add the total amount. In the example above, it would be “$11,000”.
- Adjust the amounts for Schedule 1, Part II, and Line 24Z. Other adjustments. List this as “Form 1099-K received by mistake” and list the amounts.
- Keep your 1099-K copy for you record. I’ll keep this in case you have a question in the IRS.
Following the above process, cancel the incorrect 1099-K. However, if the IRS believes that income is legal, it may flag or audit your return. If you have any questions, be sure to contact a tax expert.