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Venmo, PayPal, Cash App must report $600+ in business transactions to IRS

Starting Jan. 1, mobile money apps like Venmo, PayPal and Cash App must report annual commercial transactions of $600 or more to the Internal Revenue Service.

As of Jan. 1, mobile payment apps like Venmo, PayPal and Cash App are required to report commercial transactions totaling more than $600 per year to the Internal Revenue Service.

The change to the tax code was signed into law as part of the American Rescue Plan Act, the Covid-19 response bill passed in March.

Previously, these mobile payment apps only had to tell the tax authorities when a person had over 200 commercial transactions per year that exceeded $20,000 in total value, the IRS said.

Starting Jan. 1, the IRS said, if a person accrues more than $600 annually in commercial payments on an app like Venmo, then Venmo “must file and furnish a Form 1099-K” for them — reporting on all the commercial income they collected through the app.

The tax-reporting change only applies to charges for commercial goods or services, not personal charges to friends and family, like splitting a dinner bill.

In an explanatory document on the new tax changes, the IRS said these changes also apply to people who sell items on internet auction sites like eBay and people who "have a holiday craft business" so long as they accept credit card payments through these apps.

PayPal said both "PayPal and Venmo offer a way for customers to tag their peer-to-peer (P2P) transactions as either personal/friends and family or goods and services by choosing the appropriate category for each transaction."

"Users should select Goods and Services whenever they are sending money to another user to purchase an item, like a couch from a local ad listing or concert tickets, or paying for a service," PayPal said.

In a statement to NBC News, Early Warning Services, LLC, the network operator of Zelle, said, "If payments received on the Zelle Network are taxable, it is the consumer or organization's responsibility to report them to the IRS."

"The law requiring the issuance of forms 1099K applies to third party payment networks that handle the settlement of funds. Payments between friends and family, and eligible small businesses sent through the Zelle Network are not subject to this law because Zelle facilitates messaging between financial institutions, but does not hold accounts or handle settlement of funds."

CORRECTION (Jan. 19, 2021, 3:37 p.m. ET): A previous version of this article misstated Zelle’s tax reporting requirements. Zelle clarified after publication that it is not required to issue tax forms for transactions above $600 annually. The article has been updated with the company’s statement.