Apple Pay, Venmo and Cash App must now be reported to the IRS | Weber Gallagher Simpson Stapleton Fires & Newby LLP

Weber Gallagher’s Family Law Group often reviews payments made through popular mobile apps, including Venmo and Apple Pay, for discovery and assistance purposes. Clients who use one of the many mobile payment platforms available to pay for services and goods help attorneys maintain accurate and timely records of those payments. For example, the babysitter is ready to go after a long night, a customer can send money to the babysitter instantly through Venmo. Or maybe a customer wants to buy something on Etsy for one of the kids. The buyer can go to Apple Pay and, voila, the seller has the money, and the buyer has a gift. Well, the Internal Revenue Service (IRS) now wants in on the action. Starting January 1, 2022, all mobile payment apps, including Venmo, PayPal, and Cash App, must report annual business transactions of $600 or more to the IRS.

The tax code change was part of the American Rescue Plan Act passed in March and will have a huge impact on the way people do business. This was a dramatic change from the days when the IRS only taxed mobile payment apps if there were 200 business transactions per year and the amount exceeded $20,000 in total value. Now, all payments for childcare and other services or purchases of commercial goods that meet the threshold will require mobile apps like Venmo to file and provide a 1099-K form. The new IRS rule will also apply to online craft businesses or purchases made on eBay. However, this will not apply to personal charges to friends and family for sharing a dinner bill. Interestingly, Zelle payments are not subject to the 1099-K requirement because Zelle is between financial institutions and does not hold accounts or manage the settlement of funds. It is important to be aware of the payments calculated on these apps to determine if the transactions will be taxable.

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