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Expect a 1099-k from PayPal / Venmo

Updated: Jun 8, 2023

Do you use Venmo, Zelle, Pay-Pal or other 3rd party payment processors in your business or personal life? Maybe you use it to collect planning fees, selling documents or just paying your friends back for pizza. Regardless , these Apps are how we move money around.

Now keep in mind, all income is required to be reported on your tax return, but in the past unless you received over $20,000 or completed 200 transactions in a year, nothing was reported to the IRS and you wouldn’t receive a 1099-k from these companies. All that is looking to change in 2023.

In 2023, you will likely receive a 1099-k if total funds received for the year exceeds $600. That is a big change from $20,000! So what does this mean for your personal and business dealings using these apps? It’s not as bad as it sounds!

Personal - Friends and Family Payments

Not much changes on the friend front. Lets say your friend pays you $50 to reimburse you for some food and drinks you bought last night. As long as the payment is through friends and family, then these transactions aren't included in your income nor are they reported on a 1099-K. You didn't actually make any money, so that seems fair!

Now let's say you sold a couch on Facebook Marketplace. You bought it for $800 and sold it a couple years later for $600. You technically lost $200 so there is no income or gain to report. Usually, people pay you through the friends and family side and like I said above, it's not included in the $600 nor would it be reported on a 1099-k. All legit here!

However, if they purposely or accidentally click the button stating that this transaction was for a “good or service”, then it will be marked by the 3rd party app as a business transaction. Even though it was for an old couch, this counts toward your $600 and once you reach that threshold, both you and the IRS will receive a 1099-k indicating so at the end of the year. Not much you can do about it, but like I said it's not income, it's not taxable. However, it will be reported to the IRS as if it was taxable and you will have to include it on your tax return. Your tax preparer will just back it out as non-taxable. But you need to let your preparer know.

Business - “Goods and Services

Maybe you charge a planning fee, sell online documents, have a mentor program or have some other reason for people paying you through one of the 3rd party apps. Whatever the reason, it is required to be reported and is taxable. Some people may just accept payments by friends and family and not report it, but guess what, that is illegal and 3rd party apps and the IRS are cracking down. These apps want businesses using a business account and personal accounts for personal use. Once you reach that $600 income threshold in your business account, you and the IRS will receive a 1099-k at the end of the year from that 3rd party payment company. If you don't reach the $600 limit, you will not receive a 1099-k, but the money still needs to be reported as income either way. This is why it is so important to track your income and expenses throughout the year.

So What's the Problem / Solution?

The problem arises when we start mixing business and personal transactions. Figuring out which is which at the end of the year can be a mess! You could end up with hundreds of transactions, some business, some personal and here you are trying to figure out which is which! You might end up not reporting enough or even paying taxes on transactions that you shouldn't!

The best way to deal with these changes and ensure your tax season isn't a mess is to establish a business account within the app and keep your personal transaction personal. WIth a business account you usually pay a small transaction fee when you are paid, but at least you will know what transactions are business and what transactions are personal. The business accounts also offer various protections for both the consumer and your business.

It might be a shock when individuals receive a 1099-k at the end of this year, but at least you are prepared and know the actions to take to avoid the chaos!

If you have any questions, please do not hesitate to comment below.

Author – Andy Roed

I am a tax professional and financial coach focusing primarily on helping travel agents. I am someone who is married to a travel agent, loves to travel and loves everything finance. The intersection of these passions has led me to a career that I am truly passionate about. My goal is to help travel agent get control of both their business and personal finances as well as helping to alleviate the stress with tax time.

If you found this article interesting and are interested in more like it or are looking for someone to help you with all things taxes and finance please visit me at or join our Facebook Community.

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