News

You’ll have to pay taxes on some Venmo, CashApp funds soon

Editor’s note: This story has been updated to reflect the number of transactions that would trigger a 1099-K.

DENVER (KDVR) — With tax season starting this week, you might notice a tax form in your mailbox. This is Form 1099-K, which taxes earnings you’ve made on mobile apps.

If you’ve earned a certain amount of taxable dollars from payment apps like Venmo, CashApp or Paypal, or through online marketplaces like Facebook Marketplace or Poshmark, you might have to pay taxes.

Don’t worry, you won’t have to report taxes on money from your friends or family. According to the Internal Revenue Service, something like sharing a meal or repaying a roommate for a bill isn’t taxable.

But within the next few years, more and more people will be receiving this form, and everyone will have to fill it out.

Nexstar’s FOX31 spoke with Robert Persichitte, a Metropolitan State University of Denver affiliate professor of accounting, about what’s new with Form 1099-K.

1099-K itself isn’t new

For years, companies could send Form 1099-K if users acquired more than $600 on an online app, but not many companies participated, according to Persichitte.

What changed in 2023 is that companies are now required to send the form if you make over a certain amount of money. For the 2023 tax season, it won’t affect many people since it’s only required if you earned $20,000 and had more than 200 transactions.

With that being said, you could still get a form in the mail, said Persichitte. Companies can send tax forms to people who have collected over $600 from the payment app.

Although you may not see Form 1099-K this year, you’ll likely see it soon.

IRS delays 1099-K reporting threshold

Initially, anyone who earned over $600 through online payments or marketplaces would be subject to taxation during the 2023 tax season. However, in November, the IRS announced the delay of the $600 threshold with a plan to slowly decrease the threshold over a few years.

For the 2024 tax season, the IRS plans to drop the threshold to $5,000 before eventually moving it to $600, according to the IRS.

While you might not be making $20,000 through online transactions, you might see a new form in the mail with the threshold dropping year by year, said Persichitte.

“It’s a trend, and more people are going to get it this year than they got it last year. And more people are gonna get it next year than got it this year,” said Persichitte. “More and more people are going to get it every single year, and it’s just a brand new form.”

Once the threshold drops to $600, anyone who has received over $600 will get a 1099-K even if it’s just Venmo payments back and forth between family.

What changes with Form 1099-K?

If your earnings are taxable, for example, if you’re an Uber driver who made over a certain amount of money, you might receive the form.

However, you still might get the form if you’ve spent a certain amount of untaxable money. Even if it’s not taxable, like friend transactions through Venmo, you still need to fill out the form.

“If you get a 1099-K, you’ll have to put on your tax return, ‘I got this, I’m acknowledging this cash flow, but it’s not taxable,’” said Persichitte.

But that’s not the big change, according to Persichitte.

“Where it really is going to change for people is stuff that was taxable and they were never claiming it on their taxes. Let’s say you have collectibles or you make something and people Venmo you for it, that was always taxable, there is never a time is not taxable to you. It’s just now you’re getting a form about it,” said Persichitte.

Form 1099-K is a deeper paper trailer.

“In terms of what will change, if it’s nontaxable activity, gift and reimbursement, nothing changes. If it was taxable activity, you were always not paying your taxes, but this time you’re going to get caught,” said Persichitte.

Powered by News Channel 9.

Related Articles

Back to top button