Self-Employed 1099-K Myth Busting: Am I Taxed When I’m Paid Through Venmo or Paypal? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Katharina Reekmans Modified May 25, 2022 3 min read There is a lot of rumors and misinformation going around about payment apps such as Venmo, Cashapp or Zelle, specifically when it comes to the IRS and what you will have to pay taxes on. Under the American Rescue Plan, changes were made to Form 1099-K reporting requirements for third-party payment networks like Venmo and Cash App that process credit/debit card payments or electronic payment transfers. The change begins with transactions starting January 2022, so it doesn’t impact 2021 taxes. Beginning with tax year 2022 (the taxes you file in 2023) if someone receives payment for goods and services through a third- party payment network, their income will be reported on Form 1099-K if $600 or more was processed as opposed to the old Form 1099-K reporting requirement of 200 transactions and $20,000. This change could impact people working in the gig economy, online sellers, independent contractors, and other self-employed business owners. Let’s debunk some myths around transactions on payment apps and what will be reported to the IRS. Myth: If my friend sends me money over Venmo, Cashapp, Zelle or another payment app, will I have to pay taxes on it? No, you’ll only have to pay taxes on income you’ve made off of goods and services. If you use the payment app to collect payments for goods and services you sell, that income may be subject to taxes. Myth: If my friend pays me back for dinner on a payment app will I pay taxes on it? What if I got a monetary gift? No, splitting the dinner bill with a friend using a payment app will not result in you having to pay taxes on that money. If you received money as a gift through a payment app you will not be subject to 1099-K reporting. Myth: Payment apps will report the income I receive as a self-employed entrepreneur. So this myth isn’t actually a myth at all! Payment app providers will be required to report and issue Form 1099-K if you’ve made $600 or more on any goods or services you’ve sold in the year starting with your 2022 transactions. This is a decrease from the current 200 transactions and $20,000 reporting threshold. Myth: If I was paid using a third-party platform and I didn’t receive a Form 1099-K then I don’t have to report it? This is not true, you should still report your self-employment income earned from your online seller business as self-employed were always required to do. If you earn a net income of $400 or more of self-employment income you are required to file a schedule SE reporting your self-employment taxes, which gets filed with your Schedule C and your personal taxes. Don’t forget to claim your expenses related to your business, like supplies, website cost, and start-up cost to lower your taxable income. TurboTax Self-Employed searches for deductions specific to your industry and you can track your business income, expenses, and mileage year-round with QuickBooks Self-Employed and then transfer the information to your TurboTax Self-Employed tax return. Myth: Payment app providers like Venmo, Cashapp, or Zelle etc are going to make this reporting change immediately. Wrong! So this change in reporting affects your 2022 transactions which will be reported on your taxes you file in 2023. So don’t worry, it won’t affect your 2021 transactions or your 2021 taxes filed in 2022. If you were paid through third party payment apps like Venmo, Cashapp, or Zell etc, your income will be reported on Form 1099-K if you have 200 transactions and $20,000 processed through the third parties in 2021. The reporting requirement will change to $600 or more for 2022 processed transactions which will be filed on your taxes in 2023. Comment with other tax myths you’d like to see busted! Written by Katharina Reekmans Katharina Reekmans is an Enrolled Agent and a contributor to the TurboTax Blog team. Katharina has years of experience in tax preparation and representation before the IRS. Her passions surround financial literary and tax law interpretation. She has a strong commitment to using all resources and knowledge to best serve the interest of clients. Katharina has worked as a senior tax accountant, operations manager, and controller. Katharina prides herself on unraveling tax laws so that the average person can understand them. 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