Venmo, PayPal, CashApp and the IRS: What to Know About Third Party Payments
🚨 New IRS 1099-K Rules for 2024: What You Need to Know! 💰
If you’ve been selling on Etsy, eBay, PayPal, Venmo, or any other online marketplace, buckle up—because the IRS has updated its Form 1099-K reporting rules for 2024! 🚀
If you raked in over $5,000 in payments for goods or services through these platforms, here’s what you need to know to stay tax-savvy and avoid any surprises. 😬📜
🧐 What Is Form 1099-K?
Form 1099-K (a.k.a. "Payment Card and Third Party Network Transactions") is a tax form that third-party payment platforms (like PayPal, Venmo, and Stripe) send to individuals who exceed the reporting threshold for payments received.
If you earned over $5,000 in 2024 from business-related transactions, expect to receive this form by January 31, 2025. Even if you don’t get one, you’re still required to report all taxable income—no sneaky business! 🕵️♂️💼
🔥 The New 2024 Threshold: $5,000
The IRS has set the 1099-K reporting threshold at $5,000 for 2024. If you received more than $5,000 in business-related payments through a third-party settlement organization (TPSO), you will get a 1099-K.
📢 Heads-up! More changes are coming: 👉 2025: The threshold drops to $2,500 👉 2026 & beyond: It shrinks all the way down to $600!
The IRS is rolling out these changes in phases to increase tax compliance (translation: make sure people report their income correctly! 💡).
💡 What This Means for You
If you sold products, provided services, or ran a side hustle and got paid via a TPSO, here’s what to do:
✅ Check your mailbox (or inbox!) – Your 1099-K should arrive by Jan 31, 2025. 📬 ✅ Report the income – If you’re a sole proprietor or independent contractor, this goes on Schedule C of your 1040. ✅ Keep solid records – Save invoices, receipts, and transaction details. 🗂️ ✅ Claim your deductions! – If you had business expenses, write them off to lower your taxable income.
❌ What Doesn’t Count as Taxable?
Not all payments received through PayPal or Venmo are taxable. Examples of non-taxable transactions:
🚫 Paying a friend back for dinner 🎁 Receiving a gift from a family member 🏠 Splitting rent with a roommate
But be careful! If any of these transactions accidentally appear on your 1099-K, talk to a tax pro ASAP to fix it. 🛑📞
🎯 Final Thoughts
The IRS’s lowered 1099-K reporting threshold is part of an effort to keep up with the digital economy 📲💸. If you’re selling online, freelancing, or running a small biz, stay ahead of these changes, keep good records, and report your income properly to avoid any tax-time headaches.
And as always—this isn’t legal or tax advice! Consult with a tax preparer or attorney to get expert guidance for your specific situation. 🧑💼⚖️
Got questions? Let me know! ⬇️ Let’s navigate these tax changes together. 🚀💡