Find out if the IRS requires you to report cash app payments.  

You may have seen recent headlines about new rules on reporting cash payments to the IRS. For folks who use payment apps like Venmo, CashApp and PayPal, there’s a lot of confusion. Whether you use the apps for splitting the restaurant check with friends or accepting payment for a side hustle, here’s what you need to know.

The background for the $600 reporting rule

In 2021, the IRS announced a new rule that would require third-party payment settlement organizations—like the apps mentioned above—to file a 1099-K for transactions totaling $600 for payments for goods and services in 2023.

Payments reported on the 1099-K are not considered taxable income, but the amounts reported are used to calculate taxable income.

In late 2022, before the rule went into effect, the IRS announced that the $600 reporting rule would be delayed until 2024.

The current status of the rule—delayed again

On November 21, 2023, the IRS announced another delay for Form 1099-K reporting of $600 in payments for goods and services.

Implementing the rule in phases

According to the November 21 announcement, the $600 reporting rule will be phased in.

The IRS will treat 2023 as a transition year and 1099-K reporting will not be required unless a taxpayer receives over $20,000 and has more than 200 transactions in 2023.

The agency plans a threshold of $5,000 for the tax year 2024.

In 2025, the rule’s original intent will be in effect with a threshold of $600. However, this could change as the IRS is currently seeking feedback on the phase-in from taxpayers and tax preparers.

What doesn’t get reported under the $600 rule

The reporting rule does not apply to personal transactions such as:

• Birthday or holiday gifts
• Sharing the cost of ride
• Splitting a restaurant check
• Paying someone for a household bill

When making personal transactions, the IRS says, when possible, to make a note in the payment app that it’s a non-business payment. 

 

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