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PayPal & Venmo: The IRS may charge if used incorrectly

There are new rules in place for using payment apps like Venmo and PayPal thanks to the IRS.

venmo and paypal cash payment apps on cellphones, subject to taxes from the IRS

If you have over 200 transactions worth over $20,000 per year, you were subject to these rules in 2021.

In 2022, if you have transactions worth over $600 then you’ll need to pay taxes on them and receive a 1099-K form.

IRS: Different payment app amounts to report on taxes

How to get around the IRS if you aren’t using PayPal or Venmo for income or business

There is an option called Peer to Peer in Venmo and PayPal so you can show the payment you’re making is for family and friends or goods and services.

If you’re using the app to purchase an item off Craigslist or for a service, you should choose goods and services.

The settings are built in to PayPal and Venmo to help prevent accidental business transactions.

IRS: Payment apps and reporting a 1099-K

There will be a prompt that says “Turn on for purchases” on Venmo.

Turning it on will allow a business transaction to take place.

On PayPal your confirmation will say “sending to a friend” near the amount if it is not a business transaction.

You can change between types of transactions by clicking the text in PayPal.

Can you fix a transaction if it was completed wrong on PayPal or Venmo?

It won’t be uncommon for teens to use the wrong type of transaction.

If it happens on PayPal, the payment can be declined.

After they decline it, whoever was sending the transaction can resend it correctly.

Payments can also be requested through PayPal.

To fix it with Venmo, you’ll need to contact customer service to have them change it so it does not get taxed.

IRS report: $600 CashApp and PayPal transactions

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