Cash App Taxes: Guidelines for Reporting Money Made on Venmo, Paypal, Zelle

Digital payment apps provide a convenient way for small business owners to collect payments from customers and clients. While income from these sources has always been subject to taxes, the IRS has taken steps to crack down on gig workers and freelancers who haven’t been reporting their earnings.

If you received a certain amount of income from Cash App, Venmo, PayPal, and certain other apps, you might get a new form you’ll need to include with your 2024 tax return. Here’s what you need to know about cash app taxes and other payment platforms as you prepare for tax season.

Table of Contents

1. How the IRS views payments from cash apps
2. Venmo, PayPal, Cash App, and Zelle: How tax rules apply
3. How much can you make before you owe taxes?
4. How to report cash app income on your taxes
5. What happens if you didn’t report this income in the past?
6. How to stay ahead of cash app tax rules

How the IRS views payments from cash apps

The IRS treats income earned through cash apps the same way it views income received through any other payment method. If you’re a small business owner, gig worker, freelancer, or landlord, any money you earn for goods and services or renting property is considered taxable income. 

However, because business owners don’t always report that income, the IRS created a new rule to increase compliance. More specifically, the IRS requires cash apps and other money-earning apps to file a 1099-K form with the IRS for anyone who has received income that exceeds a certain threshold. 

That threshold was initially $600, but the federal tax agency has since decided to delay full implementation of the rule. Here’s how it will phase in over the next few years:

Tax year	Reporting threshold
2024	$5,000
2025	$2,500
2026 and beyond	$600

Note that while payment apps aren’t required to send you a 1099-K if your income is below the annual threshold, they may still choose to send you one. But regardless of whether you receive one, your income remains taxable.

That said, any money you receive that’s designated as a friend and family payment isn’t subject to income tax. Also, if you’re a casual seller of household items, the IRS may view that income as the equivalent of an occasional garage or yard sale, for which income isn’t taxable. 

If you’re earning income through payment apps, a general rule of thumb is to set aside 30% to 40% of your net income for federal and state income taxes. A qualified tax professional can give advice on making estimated tax payments and how you should adjust this percentage based on your individual circumstances.

Venmo, PayPal, Cash App, and Zelle: How tax rules apply

The IRS rules are the same regardless of which payment app you use. However, different apps may have unique internal policies. Here’s what you need to know about the most popular cash apps.

Venmo tax rules and 1099-K reporting

In most states, Venmo will issue a 1099-K to you if you received more than $5,000 in payments for goods and services in 2024. However, the threshold is lower if you live in one of the following states:

State	Minimum reporting threshold
Illinois	$1,000 across 4+ transactions
Maryland	$600
Massachusetts	$600
Vermont	$600
Virginia	$600

Venmo will also issue a 1099-K if you were subject to backup withholding during 2024, regardless of how much you earned. 

Personal payments billed as “friends and family” won’t be included in a 1099-K. However, if you have a Venmo business account, any payments you receive are considered “goods and services” payments. 

If you occasionally sell items, you can use a personal account and ask the buyer to use the friends and family tag to avoid a 1099-K. However, they may still choose to select goods and services to take advantage of the platform’s purchase protection.

PayPal tax rules: What you need to know

Venmo is owned by PayPal, so both payment platforms have the same policies for 1099-K reporting. For most business owners, gig workers, freelancers, and landlords, the threshold is $5,000. The threshold is lower for the following states:

State	Minimum reporting threshold
Illinois	$1,000 across 4+ transactions
Maryland	$600
Massachusetts	$600
Vermont	$600
Virginia	$600

You’ll also receive a 1099-K if you were subject to backup withholding, regardless of how much you earned. 

As with Venmo, PayPal won’t include payments tagged as personal or friends and family. That said, if you’re a freelancer or business owner with a business account, all payments you receive are automatically tagged as goods and services.

If you’re a casual seller with a personal account, you may choose to ask buyers to use the friends and family tag to minimize your chances of getting a 1099-K. However, it’s suggested that they select goods and services to qualify for PayPal’s purchase protection program.

Cash App taxes: Do you owe money?

Cash App only issues 1099-Ks to business account owners who received more than $5,000 in payments in 2024—even if you switched from a business to a personal account before the end of the year. If you have a personal account, you don’t need to worry about receiving a form.

The payment platform issues a 1099-K at a lower threshold in the following states for card payments:

State	Minimum reporting threshold
Washington, D.C.	$600
Illinois	$1,000 across 4+ transactions
Maryland	$600
Massachusetts	$600
Missouri	$1,200
Vermont	$600
Virginia	$600

If you use both Cash App for Business and Square Point of Sale services or you have multiple accounts for the same taxpayer identification number, the platform will aggregate your gross transactions to determine if you’re eligible for a 1099-K.

Zelle tax reporting: The exception to the rule?

While other cash apps are required to comply with the IRS’s new rule, Zelle is an exception because of its structure. 

Unlike other payment apps, Zelle doesn’t hold any funds. Rather, it simply facilitates transactions between bank accounts. So even if you have a business account with Zelle, payments you receive from clients and customers aren’t reported to the IRS. 

That said, you’ll still need to report that income on your own. If you’re subject to an IRS audit, the agency can request bank statements to find potentially unreported income.  

How much can you make before you owe taxes?

Any income you earn through a cash app, online marketplace, ridesharing platform, auction site, ticket resale site, crowdfunding platform, or freelance marketplace is considered taxable. 

So even if you didn’t receive a 1099-K form, the IRS expects you to report that income on your tax return. 

One exception to that rule is if you occasionally sell a household item because it’s the internet equivalent of a garage or yard sale. However, if you develop a business of buying and flipping items for profit, that income is not exempt.

Think about tax deductions, which can offset what you owe. Generally, the IRS allows you to deduct any expenses for your business that are deemed ordinary (i.e., common and accepted for your trade or business) and necessary (appropriate for your business). The deductions you can take vary based on the type of business you own. 

I recommend speaking with a qualified tax professional about the appropriate deductions for your business that can help reduce your taxable income.

How to report cash app income on your taxes

If you’re eligible to receive Form 1099-K from one or more cash apps or other platforms, they must send it to you by January 31. The form will include your taxpayer identification number and the gross payment amount that you received during the previous tax year.

Where you report the income will depend on the type of business you have:

Business type	Where to report
Gig worker, freelancer, hobby seller, or other self-employed	Schedule C
Partnership	Schedule E
Corporation	Form 1120
Landlord	Schedule E or Schedule C

• Selling personal items: If you sold a personal item at a loss, you can zero out the reported income so it won’t be taxable. If you made a profit, however, the profit is taxable.
• Deductions: The 1099-K won’t include any fees, credits, refunds, or discounts you paid or provided as part of the payments you received. However, you can keep track of those and deduct them from the income you report. 
• Inaccurate form: If you received a 1099-K when you shouldn’t have or the form you received has inaccurate information, you can request a correction from the issuer. You can also file your return and note the error on Schedule 1 of your 1040 form.

What happens if you didn’t report this income in the past?

If you haven’t reported income earned from Venmo, Cash App, or other payment platforms in past tax years, it may be wise to file an amended return for each applicable year to include the unreported income.

If you owe additional taxes, you may be subject to interest charges and a failure-to-pay penalty, which is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid, up to 25%.

If you don’t amend your tax returns and the IRS chooses to audit them, you may be subject to additional penalties on top of interest. If the amount of unreported income is substantial, you may be convicted of tax evasion, which can result in up to five years in prison and up to $250,000 in fines.

If you’re overwhelmed or facing an audit, consider consulting with a tax professional. If you owe $10,000 or more, Anthem Tax Services may be able to help. The company offers a 100% money-back guarantee if you don’t save money or have your debt reworked.

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How to stay ahead of cash app tax rules

Tax compliance is crucial for small business owners, gig workers, and freelancers. Whether or not you expect to get 1099-Ks, it’s important to maintain a digital record of all payments you receive, as well as your expenses. 

This practice can help you verify the details of any tax forms you receive and also make it easier to deduct your expenses and minimize your tax burden. Taking these extra steps can help you avoid stress and potential legal trouble.