Do you need to include payments from third-party processors like Venmo and PayPal in your tax filings?
Everything you need to know about properly filing income from third-party payment processors this tax season
Zelle ‘loophole’ to IRS rules on Venmo, PayPal isn’t for the taxpayer, expert says
Tax controversy attorney Adam Brewer unpacks the Zelle ‘loophole’ to new IRS regulations on third-party payment processors and what that means for taxpayers.
When filing your taxes, you can expect quite a bit of paperwork to come your way. If you have used any third-party payment processors within the past year, such as Venmo, CashApp or PayPal, it's possible you'll need to pass this information along to the IRS.
The key determining factors for whether you are required to report this information is how much you earned through these third-party payment processors and what the payments were for.
For this tax season, if a taxpayer receives "$20,000 in payments from over 200 transactions, third parties are required to issue a 1099-K," Jason Schwitzer, a CPA and managing partner at Nathen T. Schwitzer & Associates told Fox Business.
Venmo is an example of a third-party payment service you may need to include in your tax filings. (Igor Golovniov/SOPA Images/LightRocket via Getty Images / Getty Images)
WHERE'S MY TAX REFUND? HOW TO TRACK YOUR PAYMENT FROM THE IRS
Schwitzer noted that even though the reporting rule of $20,000 from over 200 transactions stands this year, the IRS is looking to reduce that threshold in the coming years.
This reporting reduction came when the American Rescue Plan was passed by Democrats in March 2021. This plan changed the reporting obligations, but has since been delayed.
For the 2024 tax year, the IRS is planning to set a threshold of $5,000, according to the IRS website.
If you have received $20,000 from over 200 transactions through a third-party payment processor, you'll receive a 1099-K form. (iStock / iStock)
There are exceptions to this, though. Examples Schwitzer described as situations that would not be considered taxable are payments received from credit card companies or Venmo payments received from friends. So, if you've received money from friends for their share of the monthly rent or to pay for their portion of a dinner bill, those situations won't need to be reported.
AMERICANS IN THESE STATES WILL PAY LESS IN TAXES THIS YEAR
If you do receive a 1099-K form for payments like this, the IRS recommends contacting the issuer of the form immediately.
This reporting mostly affects business owners who receive payments for their goods or services from a third-party platform.
If you do receive a 1099-K form, make sure to pass it along to your CPA to ensure it's reported properly. (iStock / iStock)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"Small businesses should consider using a bookkeeper," Schwitzer said. Having a bookkeeper on staff will help businesses stay organized, so during tax season, there won't be any confusion.