(NEXSTAR) – How the IRS treats such payment apps as Venmo or Cash App has been anything but straightforward in recent years, and some taxpayers may be wondering what they need to declare in 2024.
For most people, how they use the app will be the determining factor.
“In short, if you received business income through an app then report it to the IRS, but taxpayers shouldn’t expect a 1099-K if a friend reimbursed them for dinner or even $2,000 for a Taylor Swift ticket last summer,” tax attorney Adam Brewer, of AB Tax Law, told Nexstar.
For the many small business owners and side hustlers who use payment apps as part of their livelihood, however, the answer is a bit more complicated.
Some payment app users were bracing for the IRS to roll out new rules mandating that sales of goods or services over $600 would have to be reported to the Internal Revenue Service using Form 1099-K.
Then, in late 2023, the IRS announced that the $600 rule would be delayed, leaving the old threshold of at least 200 transactions worth more than $20,000 when taxpayers file in 2024. The IRS said the move was made to reduce confusion.
At the state level, reporting thresholds can be substantially lower, according to Venmo:
- Maryland (MD): ≥ $600
- Massachusetts (MA): ≥ $600
- Vermont (VT): ≥ $600
- Virginia (VA): ≥ $600
- Illinois (IL): > $1,000 and four-plus separate transactions
For tax year 2024, the IRS will transition to a threshold of $5,000 with the $600 limit going into effect the following year, meaning that business transactions that surpass $600 will trigger the 1099-K form, which Venmo, Paypal, Cash App and others will create.
Unfortunately, paying taxes on payment app business income isn’t tied solely to the 1099-K form.
“If you receive business income through Venmo or Cash App then you always have a requirement to report that income whether you receive a Form 1099-K or not,” Brewer said.