How Will Cash App Payments Affect Your Taxes?
Brookline, NH Taxpayer Has Questions
With the prevalence of money exchanged on Venmo, PayPal, and other cash apps, the IRS has stated that it will be cracking down on those receiving cash app money exceeding $600 in the calendar year. The threshold for receiving third-party payments is $600. When the amount exceeds this, the recipient is required to file a 1099-K. In past years Form 1099-K was only required for gross income from cash apps exceeding $20,000 or more than 200 separate transactions during the calendar year. This change will affect many sellers who receive payment through these cash apps.
A Brookline resident was operating a craft business, accepting payment through Venmo. Hearing about the changes to taxes on cash app payments, she contacted Merrimack Tax Associates for clarification.
Cash App Payments Received for Goods and Services Are Taxable
Businesses who receive cash app payments for goods and services that they provide, including those individuals making and selling crafts, are required to pay taxes on this income less their expenses for any amount that exceeds $600. In the past, the IRS has not cracked down on cash app payments under $20,000 but this is all expected to change. In the future, Venmo, PayPal, and other cash apps may require users to supply a social security number or employer identification number. This will make it easier for the IRS to identify the amount of money that you received via a cash app.
Cash App Payments That Are Not Taxable
Payments made through cash apps to friends and family are not taxable. For example, if you are sending a friend money for a ticket that they purchased on your behalf or for dinner, this will not be considered taxable income. In addition, when you sell used items and receive payment through a cash app as long as the item is sold at a lesser amount than it was purchased for, this is not considered taxable income.
The Brookline resident discovered that she did indeed need to begin reporting the income from her growing craft business. She has already engaged Merrimack Tax Associates to assist with filing the 1099-K along with her personal taxes at the end of the year.