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If you run a side hustle or a small business and accept payments on Venmo, Cash App, or an online marketplace such as Etsy, you may be getting a new tax form this year.
The Internal Revenue Service says companies that act as intermediaries for buyers and sellers must send tax Form 1099-K to any user who earned more than $5,000 on its platform in 2024.
The form, which is also sent to the IRS, keeps users accountable for reporting business or gig income. Since income collected through payment apps is not subject to withholding like income from a traditional job, taxpayers need to report the earnings on their returns and calculate the tax owed, or face penalties.
You could also receive the form if you sold personal goods, like a used couch or a sneaker collection. If you turned a profit, you'll need to report it on Schedule D, Capital Gains and Losses, says Carl Breedlove, lead tax research analyst at The Tax Institute at H&R Block. Note that if you sold a personal item at a loss, it's not tax deductible.
This reporting rule isn't entirely new, says Breedlove. Before the American Rescue Plan Act passed in 2021, the IRS asked payment apps and online marketplaces to send records for users with more than $20,000 in income and 200 transactions for the year. This excluded many small-time side hustlers and occasional online sellers, who despite not receiving a tax form were often still required to report their earnings to the IRS.
Now anyone with $5,000 or more in income from selling goods and services via payment apps and online marketplaces will be known to the IRS.
For the 2025 tax year, the threshold for issuing the form is slated to drop to $2,500, and then again to $600 for 2026, where it will stay unless new tax legislation is enacted. A $600 threshold is also used for the 1099-NEC and 1099-MISC, forms used to report non-employee payments.
For the 1099-K, "the IRS delayed the implementation of the $600 threshold in order to ease the administrative burden that would be anticipated with a significantly lower threshold," Breedlove says.
Understanding Form 1099-K
Form 1099-K is an informational return that payment processors, payment apps, and online marketplaces send to certain taxpayers and the IRS each year.
You shouldn't get a 1099-K for digitally sending gifts, reimbursements, and other personal payments to family and friends. These types of transactions are not taxable income.
Many apps ask senders to categorize each payment as business or personal before it's sent, which helps the companies keep track of which transactions to count toward the gross amount reported on the 1099-K.
Tax implications for users
Even if you don't consider yourself a business owner, the IRS may consider you one if you earn income outside of W-2 employment. All the income you earn from selling goods or services as a freelancer, hobbyist, or a gig worker must be reported on Schedule C of your tax return, where you should also list any expenses you incurred.
"A Form 1099-K simply reports gross receipts, meaning any costs associated with the sale of these products or services may be deducted on your tax return," says Jessica Wheaton, a certified public accountant and the director of tax and accounting services at Fiske & Company in Plantation, Florida, referring to the write-offs available to self-employed people. Common deductions that could lower your annual tax bill include equipment, advertising, and shipping costs.
"You should consult with your CPA or tax preparer regarding how to report this income and the related expenses," Wheaton says.
Does Zelle report to the IRS?
The reporting rule for payment apps does not apply to Zelle.
Zelle is a popular digital payments network co-owned by a group of U.S. banks. It lets users send money between bank accounts at some of the largest financial institutions, including Chase, Bank of America, and Capital One. The way it operates exempts it from the reporting requirements that apply to other popular third-party payment apps.
But if you receive any payment for your side hustle or business via Zelle, you should still report it as income on your tax return. Not doing so could lead to an IRS audit.
Does Venmo report to the IRS?
Venmo reports business income to the IRS on Form 1099-K when a user has more than $5,000 in aggregate income across accounts, except in certain states where the threshold is lower.
In Illinois, a 1099-K is required for each user with more than $1,000 in business-related income and four or more transactions. In Maryland, Massachusetts, Vermont, and Virginia, Venmo will issue the tax form for users with earnings of $600 or more.
Most people receiving 1099-Ks from Venmo will get them electronically by January 31, the company says on its website. Users who had set up their account prior to July 22, 2022, may also get the document in the mail.
Types of transactions that may be reported
Only payments that are received in exchange for the sale of goods and services are reportable. Users who set up business profiles will automatically have all of their incoming Venmo payments tagged as business transactions.
Users sending money to non-business profiles have the option to tag the payment as personal or business. Examples of personal payments include splitting the cost of a meal, paying your share of the rent, or sending a cash gift.
Venmo instructs users who receive a 1099-K and believe there's an error to log into their account via a web browser to request a correction.
How to prepare for potential reporting
You'll be asked to provide your tax ID when setting up a Venmo account. For businesses and some sole proprietors, this is an Employer Identification Number. For users who do not operate as a business, this is a Social Security Number or an Individual Taxpayer Identification Number.
Venmo uses this information to ensure accurate reporting to the IRS. If you don't provide your tax ID and your gross business transactions exceed the reporting threshold ($5,000 for tax year 2024 and $2,500 for 2025), future payments may be held and all of your payments may be subject to backup withholding of 24% until you provide your tax ID.
Does PayPal report to the IRS?
PayPal is the parent of Venmo, and its reporting practices regarding 1099-Ks are the same.
Types of transactions that may be reported
Users who send money to pay for merchandise such as a handmade gift or concert tickets or a service such as a haircut should tag the payment appropriately. If the money is being sent to a business account, it will be tagged as such automatically.
How to prepare for potential reporting
Be sure your tax information is complete in your PayPal account before you start receiving payments. And respond to any requests to update or confirm your information promptly to avoid held payments and backup tax withholding.
Does Cash App report to the IRS?
Cash App reports to the IRS for business account holders who exceeded the $5,000 transaction threshold in 2024. Users with personal accounts will not receive a 1099-K, except if they previously used a business account and changed it to a personal account, the company explains on its website.
Cash App says it issues 1099-Ks to users who fall below the federal threshold in some states. In Washington D.C., Maryland, Massachusetts, Vermont, and Virginia, the threshold is $600 or more in business transactions, and in Missouri it's $1,200 or more. For users residing in Illinois, Venmo sends the tax form when more than $1,000 and four or more transactions are recorded.
Types of transactions that may be reported
Any incoming payment to a Cash App for Business account, which is recommended for anyone selling goods or services, will be recorded as a business transaction, subject to IRS reporting.
If you have multiple business accounts that use the same tax ID, the $5,000 threshold will apply in aggregate, not for individual accounts.
How to prepare for potential reporting
Keep your tax ID, name, and contact information updated in your Cash App for Business account. This ensures accurate reporting of your payments to the IRS.
Two forms should be available in the Documents section of your account by January 31: a transactions report for the previous tax year, and a 1099-K if you're eligible to receive one.
Google Pay
Google Pay stopped allowing peer-to-peer payments in the U.S. in June 2024, so you can no longer send or receive money through the app. But the payment feature on the app was for exchanging money among friends and family, not for business transactions.
Apple Pay
Apple enables you to exchange payments with friends and family through an Apple Cash account. The feature does not allow for business transactions, so it's not subject to the IRS reporting requirements.
Differentiating business and personal transactions
If you earn money for performing a service or selling a product, then it's usually business income.
You may also generate taxable income if you sell a personal item — for example, a used bike or clothing — for more than you paid for it. In this case, the income is a capital gain, not business earnings (the two are subject to different tax rates). Use Form 8949 to report your original purchase price and the sale price and Schedule D to report your profit.
Keeping accurate records
The best way to keep track of business and personal transactions is to set up separate accounts for each. Ask clients and customers to pay you through your business account and family and friends to use your personal account.
If that's not an option, be sure to log each of your transactions for your records.
"It is critical you keep track of all payments received throughout the year. Many apps will conveniently do this for you, so it is a good idea for you to review this information regularly, so there are no surprises on your Form 1099-K," Wheaton says.
When you get your 1099-K, confirm that the gross amount reported is accurate. If it's not, contact the company that issued the form to request a correction.
Consulting with a tax professional
The rollout of this new tax rule may be confusing if you're not used to reporting all of the income you receive via online channels, or if you get a 1099-K in error.
To avoid mistakes or oversights on your tax return, consult a tax professional.
Business Insider
Writtenby Tanza Loudenback
Edited by Sarah Silbert
What Payment Apps Report to the IRS? A Comprehensive Guide for 2025
- Payment apps including Venmo, PayPal, and Cash App report business transactions to the IRS.
- Users with $5,000 or more in payment-app income for 2024 will get a new tax form, 1099-K.
- All payments earned for goods and services are taxable income, but you may be able to deduct some costs.
Overview of payment apps and IRS reporting
If you run a side hustle or a small business and accept payments on Venmo, Cash App, or an online marketplace such as Etsy, you may be getting a new tax form this year.
The Internal Revenue Service says companies that act as intermediaries for buyers and sellers must send tax Form 1099-K to any user who earned more than $5,000 on its platform in 2024.
The form, which is also sent to the IRS, keeps users accountable for reporting business or gig income. Since income collected through payment apps is not subject to withholding like income from a traditional job, taxpayers need to report the earnings on their returns and calculate the tax owed, or face penalties.
You could also receive the form if you sold personal goods, like a used couch or a sneaker collection. If you turned a profit, you'll need to report it on Schedule D, Capital Gains and Losses, says Carl Breedlove, lead tax research analyst at The Tax Institute at H&R Block. Note that if you sold a personal item at a loss, it's not tax deductible.
Importance of understanding reporting requirements
This reporting rule isn't entirely new, says Breedlove. Before the American Rescue Plan Act passed in 2021, the IRS asked payment apps and online marketplaces to send records for users with more than $20,000 in income and 200 transactions for the year. This excluded many small-time side hustlers and occasional online sellers, who despite not receiving a tax form were often still required to report their earnings to the IRS.
Now anyone with $5,000 or more in income from selling goods and services via payment apps and online marketplaces will be known to the IRS.
For the 2025 tax year, the threshold for issuing the form is slated to drop to $2,500, and then again to $600 for 2026, where it will stay unless new tax legislation is enacted. A $600 threshold is also used for the 1099-NEC and 1099-MISC, forms used to report non-employee payments.
For the 1099-K, "the IRS delayed the implementation of the $600 threshold in order to ease the administrative burden that would be anticipated with a significantly lower threshold," Breedlove says.
IRS reporting requirements
Understanding Form 1099-K
Form 1099-K is an informational return that payment processors, payment apps, and online marketplaces send to certain taxpayers and the IRS each year.
You shouldn't get a 1099-K for digitally sending gifts, reimbursements, and other personal payments to family and friends. These types of transactions are not taxable income.
Many apps ask senders to categorize each payment as business or personal before it's sent, which helps the companies keep track of which transactions to count toward the gross amount reported on the 1099-K.
Tax implications for users
Even if you don't consider yourself a business owner, the IRS may consider you one if you earn income outside of W-2 employment. All the income you earn from selling goods or services as a freelancer, hobbyist, or a gig worker must be reported on Schedule C of your tax return, where you should also list any expenses you incurred.
"A Form 1099-K simply reports gross receipts, meaning any costs associated with the sale of these products or services may be deducted on your tax return," says Jessica Wheaton, a certified public accountant and the director of tax and accounting services at Fiske & Company in Plantation, Florida, referring to the write-offs available to self-employed people. Common deductions that could lower your annual tax bill include equipment, advertising, and shipping costs.
"You should consult with your CPA or tax preparer regarding how to report this income and the related expenses," Wheaton says.
Zelle
Does Zelle report to the IRS?
The reporting rule for payment apps does not apply to Zelle.
Zelle is a popular digital payments network co-owned by a group of U.S. banks. It lets users send money between bank accounts at some of the largest financial institutions, including Chase, Bank of America, and Capital One. The way it operates exempts it from the reporting requirements that apply to other popular third-party payment apps.
But if you receive any payment for your side hustle or business via Zelle, you should still report it as income on your tax return. Not doing so could lead to an IRS audit.
Venmo
Does Venmo report to the IRS?
Venmo reports business income to the IRS on Form 1099-K when a user has more than $5,000 in aggregate income across accounts, except in certain states where the threshold is lower.
In Illinois, a 1099-K is required for each user with more than $1,000 in business-related income and four or more transactions. In Maryland, Massachusetts, Vermont, and Virginia, Venmo will issue the tax form for users with earnings of $600 or more.
Most people receiving 1099-Ks from Venmo will get them electronically by January 31, the company says on its website. Users who had set up their account prior to July 22, 2022, may also get the document in the mail.
Types of transactions that may be reported
Only payments that are received in exchange for the sale of goods and services are reportable. Users who set up business profiles will automatically have all of their incoming Venmo payments tagged as business transactions.
Users sending money to non-business profiles have the option to tag the payment as personal or business. Examples of personal payments include splitting the cost of a meal, paying your share of the rent, or sending a cash gift.
Venmo instructs users who receive a 1099-K and believe there's an error to log into their account via a web browser to request a correction.
How to prepare for potential reporting
You'll be asked to provide your tax ID when setting up a Venmo account. For businesses and some sole proprietors, this is an Employer Identification Number. For users who do not operate as a business, this is a Social Security Number or an Individual Taxpayer Identification Number.
Venmo uses this information to ensure accurate reporting to the IRS. If you don't provide your tax ID and your gross business transactions exceed the reporting threshold ($5,000 for tax year 2024 and $2,500 for 2025), future payments may be held and all of your payments may be subject to backup withholding of 24% until you provide your tax ID.
PayPal
Does PayPal report to the IRS?
PayPal is the parent of Venmo, and its reporting practices regarding 1099-Ks are the same.
Types of transactions that may be reported
Users who send money to pay for merchandise such as a handmade gift or concert tickets or a service such as a haircut should tag the payment appropriately. If the money is being sent to a business account, it will be tagged as such automatically.
How to prepare for potential reporting
Be sure your tax information is complete in your PayPal account before you start receiving payments. And respond to any requests to update or confirm your information promptly to avoid held payments and backup tax withholding.
Cash App
Does Cash App report to the IRS?
Cash App reports to the IRS for business account holders who exceeded the $5,000 transaction threshold in 2024. Users with personal accounts will not receive a 1099-K, except if they previously used a business account and changed it to a personal account, the company explains on its website.
Cash App says it issues 1099-Ks to users who fall below the federal threshold in some states. In Washington D.C., Maryland, Massachusetts, Vermont, and Virginia, the threshold is $600 or more in business transactions, and in Missouri it's $1,200 or more. For users residing in Illinois, Venmo sends the tax form when more than $1,000 and four or more transactions are recorded.
Types of transactions that may be reported
Any incoming payment to a Cash App for Business account, which is recommended for anyone selling goods or services, will be recorded as a business transaction, subject to IRS reporting.
If you have multiple business accounts that use the same tax ID, the $5,000 threshold will apply in aggregate, not for individual accounts.
How to prepare for potential reporting
Keep your tax ID, name, and contact information updated in your Cash App for Business account. This ensures accurate reporting of your payments to the IRS.
Two forms should be available in the Documents section of your account by January 31: a transactions report for the previous tax year, and a 1099-K if you're eligible to receive one.
Other popular payment apps
Google Pay
Google Pay stopped allowing peer-to-peer payments in the U.S. in June 2024, so you can no longer send or receive money through the app. But the payment feature on the app was for exchanging money among friends and family, not for business transactions.
Apple Pay
Apple enables you to exchange payments with friends and family through an Apple Cash account. The feature does not allow for business transactions, so it's not subject to the IRS reporting requirements.
Best practices for using payment apps
Differentiating business and personal transactions
If you earn money for performing a service or selling a product, then it's usually business income.
You may also generate taxable income if you sell a personal item — for example, a used bike or clothing — for more than you paid for it. In this case, the income is a capital gain, not business earnings (the two are subject to different tax rates). Use Form 8949 to report your original purchase price and the sale price and Schedule D to report your profit.
Keeping accurate records
The best way to keep track of business and personal transactions is to set up separate accounts for each. Ask clients and customers to pay you through your business account and family and friends to use your personal account.
If that's not an option, be sure to log each of your transactions for your records.
"It is critical you keep track of all payments received throughout the year. Many apps will conveniently do this for you, so it is a good idea for you to review this information regularly, so there are no surprises on your Form 1099-K," Wheaton says.
When you get your 1099-K, confirm that the gross amount reported is accurate. If it's not, contact the company that issued the form to request a correction.
Consulting with a tax professional
The rollout of this new tax rule may be confusing if you're not used to reporting all of the income you receive via online channels, or if you get a 1099-K in error.
To avoid mistakes or oversights on your tax return, consult a tax professional.
Business Insider
Writtenby Tanza Loudenback
Edited by Sarah Silbert
