“Just Venmo Me”: How Third-Party Apps Might Affect Your Tax Bill

It’s becoming more common every year: Americans are transferring money electronically more than ever. Not surprisingly, the IRS is catching up. If you’ve accepted payments via apps such as Venmo or PayPal in 2022, you may receive Form 1099-K, which reports income from third-party networks, in early 2023. We want to ensure that these tax changes don’t catch you by surprise and provide an unwelcome post-holiday gift.

From the onset, we need to clarify that income is still taxed as income, as it always has. The WAY in which Americans receive income has changed, namely via third-party apps. “There’s no change to the taxability of income,” the IRS noted in a recent press release about preparing for the upcoming tax season. “All income, including from part-time work, side jobs, or the sale of goods is still taxable,” the agency added.

Before 2022, you may have received a 1099-K if you had more than 200 transactions worth an aggregate above $20,000. But the American Rescue Plan Act of 2021 slashed the threshold to just $600, and even a single transaction can trigger the form.

While the change targets business transactions, not personal transfers, experts say some taxpayers may receive 1099-Ks by mistake. If this happens, the IRS says to contact the issuer or adjust your tax return. Either way, the IRS urges “early filers” to make sure they have all tax forms, including 1099-Ks, before submitting their return. Overall, ensure you are not unnecessarily paying taxes on personal transfers, even if you receive a 1099-K form by mistake.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

Comment On This Article