Recently, social media has been blowing up with the news that beginning January 1, 2022, the IRS will be issuing a 1099-K to all users who receive more than $600 on Venmo, CashApp, or any other financial transaction app that allows funds to be transferred between users. The general consensus seems to be that any user with more than $600 in transactions will automatically be taxed on that income. While it’s not a black-and-white answer, the truth is that most of the time, users will not receive a 1099-K, and those who do will likely not incur any additional taxes.
Who Does the $600 Venmo Limit Apply To?
First, it’s important to note that the IRS isn’t interested in targeting what are called “family and friends” transactions. If you’re receiving a rent payment from your roommate or reimbursing a friend for dinner, that income will not be viewed as countable income towards what is deductible or taxable.
If the funds being transferred are for goods or a service, the new law simply requires businesses to report those funds exceeding $600 rather than the old $20,000 limit. It does not change what is taxable or deductible–it merely seeks to achieve more honest reporting for companies that do a large percentage of their business on Venmo.
Will I Automatically Be Taxed More On Venmo Transactions Exceeding $600?
If your Venmo or CashApp transactions exceed $600 and qualify as taxable income, you will likely be sent a 1099-K by the IRS to fill out. This does not mean that you will automatically be taxed more–the IRS simply wants to ensure that businesses are being held accountable for their earnings across all channels.
Remember, the IRS only audits a very small fraction of taxpayers. This doesn’t change that, and if you mistakenly receive a 1099-K for Venmo transactions that are largely personal transactions, you can safely ignore it without worrying about any repercussions.
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