GREENSBORO, N.C. — The IRS delayed implementing a $600 threshold for third-party payment apps for the 2023 tax season, but it’s on schedule for 2024. That means, if you use Venmo, Zelle, Cash App, PayPal, Apple Pay, you may find yourself on the IRS’ radar.
Here are three common scenarios:
#1 You go out to dinner with friends, you pay the bill and the others send you money by a cash app
#2 You pay the rent/mortgage and your roommates/spouse send you their portion of the rent by a cash app
#3 You buy the shirts for your kid's little league team and the rest of the parents send you the money by a cash app
Chances are you'll probably have more than $600 in money sent to you in a year's time and $600 is the IRS’ threshold for reporting that money as income.
“Anytime they enact a tax law, there are winners and losers and you're going to hit it inadvertently with splitting rent with your roommate and we may have to include it on your taxes and show it was not necessarily income,” said Ryan Dodson of Liberty Tax Services.
WILL YOU BE FILLING OUT A 1099-K?
You may have to fill out a 1099-K form for those transactions next tax season to prove they were personal and this wasn't income from a business.
Now, if you have a side gig, and you get paid using a third-party app and you also split checks with your friends using a third-party app, you probably need 2 accounts.
HAVE MORE THAN ONE CASH APP ACCOUNT
“I would encourage you to separate your business from your personal. If someone sends you $10 to reimburse you for the meal that you paid for, please separate that from business transactions,” said Dodson.
Here's the big takeaway, don't wait until tax time next year to figure this out.