If you’re using Venmo for business transactions, it’s time to pay close attention to the upcoming changes in the 1099-K reporting threshold. For 2024, the threshold is set at $5,000. However, starting in 2025, this threshold will drop dramatically to just $600. This means that more transactions will be reported to the IRS, potentially affecting many small business owners, freelancers, and gig workers
Why This Matters
The American Rescue Plan of 2021 introduced these changes to improve tax compliance. Previously, the threshold was $20,000 or 200 transactions, whichever came first. The new, lower threshold aims to ensure that more income from third-party payment platforms like Venmo is reported accurately. 2
Form 1099-K is a report of payments you got for goods or services during the year from either credit, debit or stored value cards such as gift cards (payment cards) as well as payment apps or online marketplaces, also called third party settlement organizations or TPSOs. These organizations are required to fill out Form 1099K and send copies to the IRS and to you. Payments you got from family and friends should not be reported on Form 1099-K.
What You Can Do
- Keep Detailed Records: Maintain thorough records of all transactions, especially those related to business activities.
- Consult a Tax Professional: Seek advice from a tax professional like Jeanine Hemingway CPA to understand how these changes might impact your tax situation.
- Stay Informed: Keep an eye on updates from the IRS and Venmo to stay ahead of any further changes.
By staying vigilant and prepared, you can navigate these changes smoothly and ensure compliance with tax regulations.
Resources:
- Taxes | Moneywise
- https://www.irs.gov/businesses/understanding-your-form-1099-k