1. What are the new reporting requirements exactly?
This requirement only pertains to payments received for sales of goods and services and DOES NOT apply to friends and family payments.
Starting the 2022 tax year, the IRS will require reporting of payment transactions for goods and services sold that meets or exceeds $600 in a calendar year. Anyone who receives at least $600 in payments for goods and services through Venmo, or any other payment app, can expect to receive a Form 1099-K. While Venmo is required to send this form to qualifying users, it’s worth noting that certain amounts included on the form (like refunds) may not be subject to income tax.
To determine whether specific amounts on your 1099-K are classified as taxable income, it’s best to speak with a tax professional.
2. What makes a payment goods and services?
When sending money on Venmo, users can choose to tag a payment as being for “goods and services”.
Whether it’s for a product you sell, a service you provide, or even an old couch you don’t want anymore, the person paying for the item or service can decide whether to tag the payment. All payments sent to business profiles on Venmo are tagged as purchases automatically and are therefore considered to be for goods and services.
This helps create a safer marketplace by making both the buyer and the seller eligible for Purchase Protection if something goes wrong on either side.
3. What’s a Form 1099-K?
Form 1099-K, Payment Card and Third Party Network Transactions, is a tax form used to report payments for goods and services transactions. Organizations that facilitate these payments, like debit/credit card companies, PayPal, Stripe, Venmo, Etsy, Upwork, and many others, are required by law to file them with the IRS and send copies to the payment recipient.
4. If I receive a 1099-K, does this include sales of stuff of mine I don’t want anymore?
Your 1099-K will show all of the payments you received for sales of goods and services on Venmo, including refunds.
It’s worth noting; however, that any amounts generally excluded from gross income are not subject to income tax. This can include amounts from selling personal items at a loss, gifts, and more. For example, if you bought an item for $800 and later sold it on Venmo for $700, this amount would not be subject to income tax.
As always, it’s best to seek advice from a licensed tax expert if you have any specific concerns about reporting your income or whether your income is taxable.
5. What happens after I confirm my tax info?
Confirming your tax information (ITIN, SSN, or EIN) ensures that we’ll have everything we need to issue your tax forms if needed. If you earn at least $600 in payments from goods or services on Venmo during the calendar year, we’ll issue you a Form 1099-K at the beginning of the 2023 tax season and send a copy to the IRS. If you don’t end up earning at least $600 from these payments on Venmo, you can always download your account statements to help you with any reporting obligations. You may also want to seek the advice of a licensed tax expert.
6. When do I have to do this by?
You’ll need to report your earnings for 2022 during the 2023 tax season. To issue your Form 1099-K in time, we’ll need your tax info confirmed by 12/31/2022. That said, the sooner you confirm your tax info, the sooner you’ll be able to send, spend, and withdraw money from any payments that might be on hold.
7. I’ve sold lots of stuff in the past. Why haven’t I had to do this before?
The IRS has always required payment settlement entities (PSE) to report earnings and issue 1099-Ks, but until this year, the threshold was much higher ($20,000 and 200 transactions) so it didn’t affect nearly as many people.
8. What if I don’t confirm my tax info?
When you approach the reporting threshold for your state of residence, subsequent payments you receive for sales of goods and services will be placed on hold until you confirm your tax info. If your payments were incorrectly labeled as being for goods and services, you can contact us for assistance. If you do nothing, we’ll still be required to send you and the IRS a Form 1099-K. The tax ID field will just be left blank.
9. What if I just go sell on another payment platform?
While they might be enforcing it differently, all payment platforms, including PayPal, Stripe, and Square, have the same IRS obligation. Keep in mind, if the collective amount you earn from sales on multiple platforms exceeds $600, you may want to speak with a licensed tax expert on the best way to account for these earnings.
10. Is Venmo keeping my money?
No, Venmo is not keeping your money. Payments placed on hold are in your account, but they're unavailable to you until you confirm your tax info. By confirming your tax info, you and Venmo are acting in compliance with the new IRS requirements.
11. Did my buyer complete their payment?
Yes. Held payments have nothing to do with your buyer and you should feel confident about providing them with your goods and/or services. Their payment is waiting for you in your Venmo account. You just can’t access it until you confirm your tax info.
We know this stuff is complicated, but we’re doing our best to keep things as easy (and legal) as possible. Learn more about selling on Venmo.
You can also read more about the new tax reporting requirements at the PayPal Newsroom.
This information is not intended to be and should not be construed as tax advice. You should consult your tax advisor regarding your reporting of these transactions.