5 things taxpayers need to know about the new IRS crackdown on Venmo and CashApp payments
- The new IRS reporting threshold for third-party payment apps is now in effect for 2024 transactions, requiring platforms to report payments over $5,000 to the IRS — a major change from the previous $20,000 limit. Taxpayers need to know this isn't just for business income; personal transactions like reimbursing a friend for dinner are NOT taxed, but the IRS may flag larger amounts without proper documentation.
- You must file a 1099-K form if you receive payments above the threshold, and failing to report income from side gigs, freelance work, or selling items online could trigger automatic audits or penalties. Taxpayers should track all 2024 payouts from Venmo, CashApp, and PayPal immediately.
- The new rule targets "taxpayers" who use these apps for business activities, such as gig workers, small business owners, and sellers. Personal gifts or money shared between family members are exempt, but you need to clearly label transactions or risk IRS scrutiny.
- To avoid surprises, taxpayers should separate personal and business accounts for payment apps, keep receipts for expense deductions, and consult a tax professional if they're unsure about their reporting obligations. The IRS is investing billions in enforcement technology specifically targeting digital payment data.
- Penalties for underreporting or ignoring the 1099-K requirement can reach up to 50% of the unpaid tax, plus interest. Taxpayers who already received a 1099-K for 2023 should ensure it matches their records to avoid costly errors on their 2024 returns.