Is Venmo going to start taxing you if you receive more than $600?
A new IRS policy requires platforms to send 1099-K tax forms for transactions over $600.
Venmo and other money payment apps are getting a bit of a policy change starting next year. Thanks to the new American Rescue Plan Act of 2021, services like Venmo and Cash App will now begin sending out 1099-K tax forms to anyone receiving payments of $600 or more.
As part of this revelation, financial advice from TikTok has a lot of people worried about the possibility that they’ll get taxed when receiving money on a peer-to-peer cash exchange app. Fortunately, this TikTok doesn’t have all of its information quite correct.
This particular TikTok describes a friend who is looking to pay another friend $700 through Venmo. The person receiving the money warns that starting next year, any payments over $600 will be subject to tax by the IRS.
Now, the IRS did recently change the threshold for reporting income from Venmo and similar apps. Previously, it required reporting for more than $20,000 in transactions, but now anything over $600 must be reported. But the key thing to note here is that this new threshold only applies to business accounts.
You won’t be taxed on peer-to-peer transactions on Venmo and other apps for personal transactions
If you use Cashapp,Venmo or zelle you’ll want to watch this 👀♬ Violin – Grooving Gecko
To clarify this updated policy from Venmo and similar apps, only business accounts will be subject to this new requirement. Cash App, one of the more popular transaction apps out there, even clarified on this TikTok with comments ensuring that only business accounts will be subject to this new requirement.
These new policies are simply in place to help the IRS track potential business transactions. If you’ve been worried about this affecting your person-to-person transactions after watching this new TikTok, you can breathe a sigh of relief.
While you could possibly still receive a 1099-K from one of these apps, that doesn’t necessarily mean that you are required to pay tax on that money.
As long as these payments are not for a business you are operating, you shouldn’t have any tax liability. Keep any receipts for any big transactions using these apps to give to your accountant, and you should be free of any tax liability.
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