The Venmo Tax 2023 lessens your worries about taxes, such as in splitting a restaurant bill or get your roommate’s half of the rent. But if you use the famous app to collect money for a business, you may need to settle up with the IRS.
The IRS wants to know about big Zelle, Venmo, and Cash App transactions, which surprised many users. (Photo: Getty Images)
The basic tax rules that separate business money from personal income haven’t changed much over the years, but Venmo tax 2023 payments have caused some confusion, which is understandable. What’s happening is:
The IRS is tightening the reporting requirements for payment apps in order to get a better handle on business money paid through Venmo and similar apps.
If you get more than $600 in payments for goods and services through Venmo tax 2023 or another payment app in 2023, the app’s owner should give you and the IRS a Form 1099-K with a record of the transactions. Before, you needed $20,000 and 200 purchases for one of these forms.
How does Venmo Tax 2023 tax work?
If you get paid for your work, you must tell the IRS and pay taxes. This is true whether you get paid by card, check, a sock full of change, or Venmo.
This has been true for a long time, but it will be easy for the IRS to keep track of these payments.
Even if you’ve always been careful with your books, the change may give you some new things to do.
Why does Venmo want to know how much I pay in taxes?
Venmo tax 2023 asks for tax details so that people who use the service to get paid for goods and services can fill out a Form 1099-K. A Social Security number or tax ID number is one of the things that are needed.
If you don’t give Venmo the information it asks for, it says it has to do something called “backup withholding” on your account. Backup withholding is a way for the IRS to try to ensure it gets your tax money no matter what. If you haven’t filled out your identifying information, the IRS will keep a portion of your income.
The amount of your funds that must be withheld can change over time, but right now, it’s 24%.
The good news is that backup withholding is usually not a problem if you give the IRS the right tax information and haven’t had problems with keeping records in the past.
If you have backup withholding, Venmo wants you to know that the platform isn’t keeping your money for its own gain.
On its website, the company says, “Venmo will not hold on to your money.” “Payments that are on hold for taxes are in your account, but you can’t access them until you give your tax information or until the next [monthly] backup withholding date.”
Splitting the bill is fine, but starting in 2022, you may owe taxes on cash app income over $600. (Photo: shutterstock.com)
What does Venmo consider a taxable payment?
If you have a business account on Venmo, all of your payments are considered to be for business. That means you’ll probably have to report that money as income and pay Venmo’s business fees.
But if you have a personal account, not all money you get through Venmo tax 2023 has to be counted as taxed income. If you haven’t noticed, there is a way for payers to say that an exchange is for “goods and services.”
The “goods and services” label can give both the buyer and the seller purchase protection, and it also lets Venmo charge itself the same fees it charges business and charity accounts: 1.9% plus 10 cents.
Things could get complicated if you sometimes used a business account that was below the tax reporting level to accept personal payments. Now, you’ll have to show the IRS that the money from personal transactions you reported on your tax forms has nothing to do with your business.
How do I use Venmo to get tax information?
Even though Venmo may send you forms in the mail, they are pretty easy to get through the app. What you should do:
Open the app for Venmo.
Tap where it says “Settings.”
Open the choice for tax papers.
Look up the year you’re interested in to see if there are any papers that apply.
Will Venmo give me any other paperwork I need for taxes?
If you buy and sell cryptocurrency through the Venmo app, you may also get tax papers. Most of the time, cryptocurrency taxes are determined the same way as taxes on other investments, like stocks: If you sell a crypto product for more than what you paid for it, you might have to pay capital gains taxes.
If you have sold cryptocurrency on Venmo in 2022, the service will give you a gains and losses statement that you can use to fill out your taxes.
Can I avoid Venmo fees by using a different service?
Venmo is not the only company that has to follow the stricter IRS rules. Other well-known payment services have also set up schemes like this.
Some things are different: Zelle says that the new rules from the IRS don’t apply to its network. And CashApp only sends tax forms to business account holders.
But keep in mind that even if a third party, like an app, doesn’t report your money to the IRS, you still have to include it when you file your taxes.
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