The IRS is tightening the reporting requirements for payment apps like Venmo. If you receive more than $600 in payments designated for goods and services via Venmo or another payment app in 2023, the app’s operator is supposed to send a Form 1099-K to you and the IRS detailing the record of those transactions, as reported by Kiplinger on February 21, 2023. Previously, the threshold to trigger one of these forms was $20,000 and 200 transactions.
If you’re receiving payments as part of your work, report all work-related payments to the IRS and pay taxes, including those received through Venmo. Venmo collects tax information and prepares Form 1099-K for users who collect payments, requiring a social security number or tax ID number.
Venmo’s business account users will likely have to report all payments as taxable income and pay Venmo’s business fees. However, as reported by Nerd Wallet on March 8, 2023, on a personal account, users need not worry about every payment being considered taxable income. The “goods and services” designation can entitle both the buyer and the seller to purchase protection, but it allows Venmo to charge fees of 1.9% plus 10 cents.
Venmo will send tax documents via the app for easy access. While Venmo may send you forms in the mail, you can also check the app for the relevant tax documents. Venmo may also send tax documents if you buy and sell cryptocurrency on its app. Cryptocurrency taxes are generally calculated in the same way as other investments, according to Nerd Wallet.
Report all income when filing taxes, even if a third-party app doesn’t report it to the IRS. Venmo may do backup withholding if you don’t provide necessary details, and the IRS will withhold part of your income until you provide the information.