1. What are the new reporting requirements exactly?
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.
This requirement only pertains to payments received for sales of goods and services and DOES NOT apply to friends and family payments.
2. 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 on Venmo, you can always download your account statements to help you with any necessary IRS reporting obligations. You may also want to seek the advice of a licensed tax expert.
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 cards, PayPal, Stripe, Venmo, Etsy, Upwork, and many others, are required by law to file them with the IRS and send copies to the IRS and the recipient.
4. 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.
5. 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.
6. What if I don’t confirm my tax info?
If you already have payments on hold, you won’t be able to access (send, spend, or withdraw) them 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.
7. 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.
8. What makes a payment goods and services?
Senders can tag a purchase as “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. 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.
9. If I receive a 1099-K, does this include sales of stuff of mine I don’t want anymore?
Potentially, but only if you sell an item for more than you bought it for. Even if you do, you’re only liable for the difference between the original price and the price you sell it for. For example, if you sell a couch for $600 that you originally bought for $1000, you wouldn’t have to report it to the IRS, even if the buyer tagged it as a good or service. However, if you buy a painting for $100 and then turn around and sell it for $3,000, you’d be expected to pay taxes on that. In either scenario, you’ll receive a Form 1099-K from Venmo if you meet or exceed the reporting threshold for the tax year. As always, it’s best to seek advice from a licensed tax expert if you have any specific concerns.
10. Is Venmo keeping my money?
No, Venmo is not keeping your money. It’s in your account, but 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, this has 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 we have 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.