Do you owe taxes for using a cash payment app?
Rochester, New York — Many people are asking the question – do I owe taxes on money received through the app, as cash payment apps like Venmo and Zelle become increasingly popular.
CPA Garrett Wagner has the answer.
“One of the tax law changes from 2021 lowered the threshold from $20,000 to $600,” said Wagner. “What got lost is that they are only tracking for businesses – not for everybody else who uses a cash payment app. Only business transactions are getting tracked and it’s only who gets the money. They’re not tracking who sends it either.”
According to Wagner, the IRS will not track or monitor person-to-person transactions – such as friends splitting a dinner bill.
There is the possibility of a person incorrectly being coded as a business.
In that case, Wagner said don’t panic. “So we want to take two steps – first, contact whatever cash payment app sent you that little letter – it should be a 1099 – and let them know, hey – I’m not a business because most likely you checked the wrong box. You’re doing that quick dinner and you’re trying to get going and you hit the wrong box. Second, even if they don’t fix it in time your trusted CPA can help you avoid any tax issues on your personal return.”