Do You Have to Report Venmo on Your Taxes?

The use of payment apps like Venmo has introduced uncertainty regarding tax obligations. Many users are unsure when a transaction needs to be reported to the Internal Revenue Service (IRS). Confusion has arisen from recent and proposed changes to reporting rules, leaving people questioning what their responsibilities are.

Distinguishing Personal and Business Transactions

The first step in understanding your tax duties is to distinguish between personal and business transactions on Venmo. The taxability of the money you receive depends entirely on the nature of the payment. If you are paid for a product you sold or a service you provided, that money is generally considered taxable income. This includes payments for freelance work, sales from a side business like selling crafts, or compensation for services such as babysitting or lawn care.

Conversely, personal transactions are typically not taxable. These are transfers of money that are not in exchange for goods or services. Common examples include a friend reimbursing you for their share of a dinner bill, splitting the cost of a concert ticket, or receiving a monetary gift for your birthday from a relative. These transactions are viewed as personal reimbursements or gifts and do not need to be reported as income to the IRS.

Venmo itself provides a way for users to tag a payment as being for “goods and services.” When a payer selects this option, it signals that the transaction is commercial in nature. This feature not only offers purchase protection for the buyer but also helps the recipient identify which payments may be considered business income. For the recipient, keeping clear records that separate these business payments from personal transfers is a fundamental part of managing tax responsibilities.

Failing to properly categorize transactions can lead to complications. If personal reimbursements are mistakenly mixed with business income, you could over-report your earnings and pay more tax than necessary. On the other hand, failing to report legitimate business income can lead to penalties and interest from the IRS.

The Evolving Form 1099-K Threshold

A primary source of confusion for Venmo users involves Form 1099-K, “Payment Card and Third Party Network Transactions.” This is an informational form that third-party payment networks, like Venmo and PayPal, are required to send to both the IRS and the recipient. The form reports the gross amount of payments received for goods and services through the platform during the year. It is designed to help the IRS track income that might otherwise go unreported.

For the 2024 tax year, Venmo is required to issue a Form 1099-K if a user receives more than $5,000 in gross payments for goods and services. The IRS then plans to lower this threshold further. For the 2025 tax year, the proposed threshold is $2,500, with the final $600 threshold expected to be implemented for the 2026 tax year.

While the federal threshold is changing, some states have established their own, lower reporting requirements. Users in these states may receive a Form 1099-K from Venmo even if their income does not meet the federal criteria, because payment processors must comply with these state-level mandates. States with a lower threshold include:

• Maryland: $600
• Massachusetts: $600
• Vermont: $600
• Virginia: $600
• Illinois: Over $1,000 and four transactions

Reporting Taxable Income on Your Return

Receiving a Form 1099-K does not automatically mean all the money reported on it is taxable, nor does the absence of the form mean you have no tax liability. The legal requirement to report all taxable income exists independently of whether you receive a 1099-K. The form is simply a tool used by the IRS for verification; the ultimate responsibility for reporting accurately falls on the taxpayer. You must report any and all income received for goods and services, even if it’s just one dollar.

For individuals who are self-employed, freelancers, or operate a small business, income from Venmo is typically reported on Schedule C (Form 1040), “Profit or Loss from Business.” On this form, you would list the gross income received from your business activities. It is here that you can also deduct ordinary and necessary business expenses, such as supplies, marketing costs, or software subscriptions, to arrive at your net profit, which is the amount subject to income and self-employment taxes.

If the income is from selling a personal item at a gain, the reporting process is different. For example, if you bought a piece of furniture for $300 and later sold it online for $500 using Venmo, the $200 gain is taxable. This type of income is reported on Form 8949, “Sales and Other Dispositions of Capital Assets,” and the totals are then carried to Schedule D (Form 1040). Selling a personal item at a loss is generally not deductible.