Getting $600 or more through Venmo? Should you be worried?
Starting January 1, 2022, the IRS will require third-party payment network providers to issue a Form 1099-K Payment Card and Third-Party Network Transactions for amounts received through them (apps like Venmo and PayPal) to report to the IRS. But does this mean that if your friend reimburses you for their share of your group Airbnb trip to Fresno that you’ll get a 1099? No.
If you don’t have a business and are just transferring cash between friends and family, roommates paying rent or cash gifts, don’t worry—this does not apply to you!
This applies to those who have a business and are set up to accept payment cards or payments from a third-party settlement organization, then you will receive a Form 1099-K but only if the aggregate amount of payments for goods and services exceeds $600 during the calendar year. In prior years, the 1099-K would have been sent out if your total transactions were over 200 and your total receipts were over $20,000 in a calendar year.
You’ll need to report the income if you have a business, also small businesses selling crafts, or selling items through online auction sites—anything where you as a seller are getting paid for your goods or services by a buyer. This does not include reselling your old personal items if they were sold for less than you bought them for, even if the transactions were on online sites. PayPal has the ability for you to select the Friends and Family payment type on PayPal to distinguish personal transactions from business transactions, and both PayPal and Venmo have buyer and seller protections on eligible transactions.
Remember, you’ve always needed to report your income. The 1099-K is just an informational form to report your sales paid to you through these third-party networks. Nothing to worry about! If you operate a business and accept online payments through third parties like Venmo and PayPal, you might want to consult your tax preparer before 1099-K’s show up.