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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I received about $1000 for a large Fourth of July party from several family members and put it all towards the food and drinks. Will this be taxed?[/quote]

No. Nothing has changed regarding what's taxable income.[/quote]

That doesn't mean anything. You think PayPal, Venmo, etc. are going to figure out why you received $1000+?  No, they're just going to report it to the IRS, send you the 1099, anyway, no you'll be forced to prove you received $1000 to pay for a BBQ party. Pain.in.the.ass.  we all know the govt will overzealous with their new army of IRS agents and try to argue and nauseum with people over proving that they received the money to pay for expenses.  Ridiculous.[/quote]

As long as you list that transaction as "friends and family", you will not receive a 1099 for those reimbursements.

Also, while I can't prove this, I think both the services and the IRS are going to be pretty lenient about one time payments. I think what this shift is really designed to capture is regular payments that are CLEARLY income. So a one time payment, even a large one, is unlikely to get flagged (unless you are dumb and categorize it as "goods and services"). But any regular payments of the same amount between two parties are going to get scrutiny. So unless you are throwing a neighborhood BBQ every month and getting reimbursed in a single lump sum on the 15th of every month, no one is going to ask you to explain anything about that event. Ever. You can calm down now.[/quote]

The problem is that it is the payer, not the payee, that tags the transaction.  There are billions of payments each year over these platforms.  Many payers will choose the wrong tag and then the payees will be stuck.  I don't share your optimism that the IRS will be lenient for one-time payments, at least on the front end.  The IRS's systems are set up to do form matching.  That means they compare all the W-2s, 1099s, K-1s, etc. for your social with what's on your return.  When they don't match, they adjust your tax and send you a letter.  It's all automatic.  The taxpayer is then going to have to send the IRS a letter explaining why the 1099 is wrong.  Going through all those letters is going to be enormously burdensome for both the taxpayers an the IRS.[/quote]

The reason they will be "lenient" about one time payments is that there are too many of them to track. And if the payments are under $600, they won't even look at them. So even that $1000 BBQ example? It would only get flagged if you were being reimbursed $1000 from one person -- if it was a bunch of people sending $100-200, I don't think the system would even register this as an issue.

Maybe I'm wrong and a bunch of people will suddenly get 1099s for transactions that are obviously reimbursements. But if that happens, it will be a huge deal and covered extensively in the media. It's very much not in the IRS's interest to be overzealous about this, especially as they refine their approach. My expectation is that they will go after the obvious tax evaders first, and those will be pretty easy to identify -- anyone receiving regular payments of the same or similar amount via these services and not reporting that amount on their taxes. Especially if they are collecting more than $600 a year form the same source. That's a huge red flag. I very much support the IRS in trying to address this because tax evasion is a genuine problem in this country and no one should be allowed to just exempt themselves from the tax system.

[b]I've also heard some young people talking about this almost gleefully. [/b]Like "oh yeah I make a ton doing dog walking on the side and it's great because it's like an extra 8k a year tax free." I think it's been normalized for many people who grew up with both gig culture and these apps that the money you get for side gigs via Venmo or whatever is under the table. If it was $800 babysitting on the weekends, I wouldn't care. But these are people making real money and simply not paying taxes on it. That's money for schools, roads, food safety, etc. We need to collect it.[/quote]

This isn't new and exclusive to young people. The only thing that's new is that instead of cash, people are paying electronically. But being paid under the table has been around for years. [/quote]

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