Do You Have to Report Venmo on Taxes?

The widespread use of payment apps like Venmo has introduced questions about tax responsibilities. Many users are unsure if money received through the platform must be reported to the Internal Revenue Service (IRS). While the tax principles distinguishing business income from personal exchanges have not changed, recent adjustments to reporting rules have created confusion for users of digital payment networks.

Differentiating Personal and Business Transactions

The first step in determining your tax obligations for Venmo is to distinguish between personal and business payments. The IRS is concerned with income, which is money you earn. Personal transactions are not taxable and include reimbursements between friends, such as splitting a dinner bill, paying a roommate for rent, or sending a monetary gift. These payments are a transfer of funds and do not represent earnings.

On the other hand, any payment received for goods or services is considered taxable income. This applies even if the activity is a side hustle and not a full-time business. Examples of taxable transactions include receiving payment for freelance work, selling a product, or earning money from services like tutoring. These payments represent revenue from a business and must be reported to the IRS.

Venmo allows the sender to tag a payment as being for “Goods and Services.” When a payment is marked this way, it signals to the platform that the transaction is commercial. This also helps Venmo identify payments that are potentially taxable income for the recipient. If you have a business profile on Venmo, all payments you receive are automatically considered business transactions.

The Reporting Threshold and Form 1099-K

The IRS uses Form 1099-K, “Payment Card and Third Party Network Transactions,” to track payments for goods and services. This form reports the gross amount of payments you received through a third-party payment network like Venmo or its parent company, PayPal. It is sent to both you and the IRS, creating a record of your potential income from these platforms.

For the 2024 tax year, which you will file in 2025, a Form 1099-K is scheduled to be issued if you receive over $5,000 in payments for goods and services. This threshold is part of a phased implementation of new reporting rules, as the IRS has delayed a planned reduction to a $600 threshold.

The gross amount reported on Form 1099-K does not account for adjustments like fees, refunds, or shipping costs. This means the amount on the form may be higher than your actual net profit. The form only includes payments designated as commercial, so personal payments for reimbursements or gifts are not included.

How to Report Venmo Income on Your Tax Return

If you have received taxable income through Venmo, you must report it on your tax return. For individuals operating a business or engaging in freelance work, this income is reported on Schedule C (Form 1040), “Profit or Loss from Business.” You list the gross income from your Venmo transactions on this form and then deduct ordinary and necessary business expenses to calculate your net profit.

You may receive a Form 1099-K that contains errors, such as including personal transactions accidentally marked as for goods and services. If this happens, report the gross amount shown on the Form 1099-K on your tax return to match what the IRS has on record. You can then make an adjustment on Schedule 1 (Form 1040) to subtract the non-taxable personal amounts, with a clear explanation.

The obligation to report all business income exists even if you do not receive a Form 1099-K. If your total earnings from goods and services are below the $5,000 reporting threshold for 2024, Venmo will not send you a form. However, the income is still taxable, and you are responsible for tracking and reporting all your business revenue.

Record-Keeping for Venmo Transactions

Maintaining clear records is important for managing your tax obligations related to Venmo. One of the simplest methods is to use the memo or note feature for every transaction. Labeling each payment with a specific purpose, such as “Reimbursement for dinner” or “Payment for logo design project,” creates a clear audit trail.

Venmo also provides the ability to download monthly and annual transaction statements. These statements can be reviewed to categorize each payment as either personal or business. Regularly reviewing these statements helps ensure you do not overlook any taxable income when it is time to file.

For those who frequently conduct business through the app, establishing a separate Venmo business profile is an effective practice. This separation prevents the commingling of personal and business funds. Keeping business finances distinct provides a clean record that aligns with the information you will report on your tax return.