How will Venmo know what is reimbursement versus income? And what to report to IRS? |
You will tell them. |
In this case, they likely will not because a 1099-K will not be automatically considered income. Other 1099s, like 1099-NEC for example, is always income. |
This isn’t true. Their “system” isn’t that sophisticated. |
Matching forms to returns is not sophisticated, and they definitely do it. https://www.irs.gov/statistics/soi-tax-stats-...ompliance-activities |
When you make a Venmo purchase (at least on my phone), when you try to make a payment it have a line that says your balance and then a button that says "Turn on for purchases". The first time I paid someone, I turned it on, thinking that it was to turn on payment by my Venmo balance vs paying on my credit card. But if you turn that on, you are paying for purchase of "goods and services" (which is what Paypal calls that). That takes out a transaction percentage for Venmo. If you leave that button off, then it sends money like the Paypal "Friends and family" option. It was confusing. Most likely your neighbor turned that on or has it default on in their Venmo settings. It was most likely a user error by your neighbor. |
It depends. What were you paid money for? If it was for selling things or providing services then you still owe taxes. Having it go into your bank account later doesn't change that. |
Okay, but if it was for lawn care it was in fact a service and the neighbor was right to turn it on. |
Right, depending on how your Ex sent the money. But no matter what, this form doesn't change whether or not you owe taxes. I don't know if you need to pay taxes on child support. I wouldn't think so, but this form doesn't change that. |
So, I looked it up and you don't need to pay taxes on child support. https://www.irs.gov/faqs/interest-dividends-o...0payments%20received |
You aren't? |
But you don't magically owe taxes on it. Because you didn't make a profit. You were reimbursed for the cleaner you contracted. |
If you didn't report something as income and they think you should, they will send you a letter (for a small subset of people) asking for an explanation. You explain away! That should be the end of it. I've received letters from the IRS for not checking a box on some forms, so this is not a big deal as some fearmongers would have us believe. |
I guess we'll see if Venmo really does only send a 1099 for "goods and services" payments -- otherwise, this other kind of transaction will generate records sent to the IRS, which will mean that if you don't report them, they'll think you're failing to disclose income. (Which happened to me once for uncovered short sales of stock, and I got a letter from the IRS that I had to reply to to avoid a large additional tax bill.) |
Okay, but you owed taxes in that case. In the case of a reimbursement you wouldn't owe taxes so they wouldn't ask you to pay them. |