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THE FREELANCER'S GUIDE TO:
Venmo 1099 Taxes
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Venmo and IRS requirements
As we continue moving toward a digital world, the way we send money and make payments keeps evolving. The shift from a cash-based economy to a digital economy with payment apps like Venmo and Paypal has completely changed the way we use money.
Venmo, for example, is a great way to send money to friends and family with the click of a button. The app has become highly popular among the younger generation and a way for freelancers and self-employed people to receive payment for goods or services.
When it comes to Venmo and taxes, there are certain requirements set by the Internal Revenue Service (IRS), and if you’re using Venmo or accepting Venmo payments, you’ll need to report this income and pay self-employment taxes. We’ll cover the ins and outs of 1099 Venmo taxation, including the Venmo taxing system and any necessary Venmo tax form.
Key takeaways:
- Payments marked as goods and service and payments to separate Venmo business accounts
- Merchants that received more than $20k over more than 200 transactions will receive a 1099-K
- Payments form Venmo are reported using the Schedule C of 1040 form
Table of contents
What’s Venmo?
Venmo is a free app that provides a way to send and receive money from friends, family or clients. You can use Venmo for things like paying rent, splitting a dinner bill with a friend, as a payment method on certain websites or apps and as a way to debit money using the Venmo debit card.
Although the app is free, some services charge a fee. For example, If a payment goes through a credit card, you’ll be charged a 3% fee. Also, there’s a fee if you instantly transfer money from Venmo to your bank account.
Do I have to pay taxes on Venmo?
Every US citizen and resident alien who earns money in the US has to pay federal and state income taxes along with other taxes that apply to individuals. That means you have to pay taxes when you receive income through Venmo, too.
The Venmo taxing system can seem a little confusing, but one thing is clear: you won’t be taxed on personal Venmo transactions, and they won’t be reported to the IRS. So if you send a friend money for last night’s dinner, this transaction won’t be taxed. You’ll only be taxed on transactions for goods and services.
If your Venmo account is used for personal and business use, it can get confusing to track which expenses are for business purposes and which aren't. But you can avoid this confusion using FlyFin, a smart tax tool that uses A.I. to find business income and deductions by automatically analyzing your expenses.
But you may also set up a separate business account. The Venmo app ensures all your financial information is up to date, so you don’t have to worry about keeping track of receipts or invoices.
What’s a Venmo 1099-K?
When you send or receive money for business purposes, the IRS wants to have knowledge of such transactions. The IRS requires the company or individual paying for a service or product using a third-party payment app like Venmo or Shopify to report this information on a 1099-K form.
So when a company or individual uses Venmo to send payment to self-employed individuals, the app is required to send a 1099-K form to the IRS reporting the transaction. But this is only for payments that exceed $20K or 200 business transactions. More on that below.
Will Venmo send me a 1099?
This Venmo tax document will arrive in your inbox and be sent to you via your account in the Venmo app. You should receive a notification from the app that your Venmo 1099 documents are ready. Usually this happens at the end of the year or before the end of February.
The Venmo app makes this process more convenient because you don’t need to save the paper copy of your Venmo 1099-K.
New reporting requirements
The IRS initially planned to implement a lower $600 reporting threshold for goods or services sold through third-party payment apps. But at the end of 2022, the agency decided to delay the implementation of the new lower threshold until 2024. So if you receive $600 or more in payments for services or goods through Venmo, you won't receive a Venmo 1099-K. Instead, the IRS will follow the old regulation for one more year. The Venmo 1099 K will be issued to people that meet these criteria:
- Earning at least $20,000 during the year
- Having at least 200 business transactions in a year
Quick tip
You don’t have to report any transactions from friends or family. The requirement applies only for the sales of goods or services.
Goods and services
You can mark a payment as goods and services in the Venmo app when you send a payment.
When you make a Venmo payment to a business, it’s automatically marked as goods and services. This protects the buyer and seller since both are eligible for Purchase Protection, if there’s a problem.
Venmo and taxes
When it comes to filing your Venmo taxes, the first step is to fill out Form 1040. Keep in mind that the payments from Venmo are reported using Schedule C of the 1040 form. This is the official document used to file annual income taxes for self-employed individuals. Paying self-employment taxes is a requirement for anyone that’s not a W-2 employee.
Typically, taxes are automatically deducted from your paycheck and applied towards Social Security and Medicare taxes. Usually, your employer pays half of the 15.3% tax rate. But when you work for yourself, you’re considered the employer and the employee, and you are responsible for paying the whole 15.3% tax rate. You can use a Venmo tax calculator to help you figure out how much you might owe in estimated tax. You can also deduct things like your home office or the miles you drive, which helps lower your tax bill.
You’ll report these deductions on Schedule C. You’ll also use this Venmo tax form to report your total or gross income from your business. But one Venmo tax document you won’t be receiving is a 1099-NEC.
Tax Forms Venmo 1099-K vs. Venmo 1099-NEC
- 1099-NEC: Used for reporting direct payments of at least $600 to self-employed individuals and freelancers by cash, EFTs, checks or direct deposit. But Venmo will not send you this form until you actually work for Venmo on a contract basis. NEC stands for non-employee compensation.
- 1099-K: For indirect payments of at least $20,000 or numbering 200 transactions or more, like third-party payment processors and credit cards.
When you’ll receive Venmo tax forms
Your 1099-Ks from Venmo should be available by January 31 of each year, and your statement for gains and losses by February 15. You’ll receive an email and a notification in the app letting you know information about your Venmo taxes is available.
From there, you can directly download the tax information. If you cannot find your tax information or you don’t receive a notification from Venmo, it may be possible you didn’t meet the requirements for the Venmo 1099. Be sure to keep the 1099 due dates in mind for avoiding penalties.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction.
Then, the CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your Venmo taxes.
Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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