Reply to So people will be taxed on venmo and zelle transactions?

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[quote=Anonymous]This shift is largely going to impact people being audited. If you are using Venmo or Zelle for reimbursement or gifts with friends and family, this will have no impact on you whatsoever -- those transactions will be tagged as "friends and family" and with the exception of a very large gift that could trigger taxation, the IRS will not care.

But for people who are cheating on their income taxes by accepting payments via these services and then not reporting it, the rule change now means that if you GET CAUGHT either mistagging these transactions (i.e. having the people who you do dog walking for tag your payments as "friends and family") or accepting payments via these services and no reporting them in your taxable income, then you will be assessed back taxes and penalties.

While this was technically always true, the IRS is getting more participation from these services now, which now must have users tag their transactions so that taxable transactions are flagged, issue 1099s for these transactions, and likely also include language in their terms of service that more explicitly explains a user's tax obligations.

This will only impact people using these services to get paid, and even now it will be possible to cheat, but don't be surprised if Venmo/Zelle/Paypal/CashApp start doing stuff like flagging regular transactions ("We've noticed this transaction always occurs on the 4th of the month -- usually transactions with this pattern are for "goods and services." Has it been mistagged? Please review your tax obligations for income at www.irs.gov") because part of what is happening here is that the IRS is asking these services to be more responsible in not allowing them to be used to hide income. And the IRS has quite a bit of power when it wants organizations to facilitate tax collection.[/quote]

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