Worried About Reporting Venmo Income? You Don't Have to Deal With It This Tax Season

Tax-filers can breathe a sigh of relief. 

Many people use Venmo on a regular basis. If you're someone who dines out frequently with friends, you may find that Venmo makes it easy to split those bills. And if you own a small business, you might use Venmo as a form of payment.

But the IRS is cracking down on payment apps when it comes to reporting. The reason? The agency is well aware that many businesses use it as a means of accepting payments, but those earnings can be hard to track. 

Initially, the IRS was going to require payment apps like Venmo to issue tax forms for 2022 for users with $600 or more in payments for the year. But that change is now being pushed back by a year to give tax preparers more time to familiarize themselves with these changes, so it's not something you have to worry about just yet.

Will you have to pay taxes on your Venmo payments?

Right now, payment apps like Venmo have to issue a tax form for anyone who receives total payments of more than $20,000 within the same year and also has more than 200 transactions. (It's worth noting that some states have lower reporting thresholds, though.) 

If you're a Venmo user and you received more than $20,000 through Venmo last year, and had more than 200 transactions, look out for a 1099-K form. You'll need it to file your 2022 taxes, which you're filing this year.

However, the $600 threshold for reporting is only going to take effect starting with the 2023 tax year. So if you received $2,000 in Venmo payments in 2022 across 42 transactions, you won't be getting a tax form for it. 

Now, before you get alarmed about these new rules, one thing you should know is that while Venmo is required to send a tax form starting in 2023 for payments totaling just $600 or more, that doesn't mean you're going to have to pay taxes on that money. You'll only be taxed if you're being paid for a good or service you provided. If you put a $200 restaurant bill on your credit card and your three friends chip in $50 each by Venmo, that's not a taxable transaction.

That said, it may be hard to know which transactions are taxable and which aren't. That's a big reason why the reporting requirements have been pushed out a year -- to figure out a good way to distinguish between the types of transactions that tend to occur on Venmo.

An accountant can help you with this change

If you receive more than $600 in Venmo this year, you should expect a tax form from Venmo in 2024. But whether that means a higher tax bill depends on your situation. That's why it may be a good idea to plan to get tax help in 2024 -- even if you've never gotten or needed any before. This new Venmo reporting rule is certainly confusing, so engaging the services of an accountant is a solid bet.