If you’re one of the many people who use payment apps like Venmo and Zelle, you’ve probably heard that companies will begin reporting amounts to the IRS. There’s a lot of confusion about the new change but this article should clear most it.
Companies that use third-party payment networks have always been required to report amounts received to the IRS. The former threshold was $20,000 but the IRS brought it down to $600 in recent years. (Check out this article for more information.)
The IRS is focused on making compliant individuals and companies who fail to report income earned from business activity. Although the IRS has clarified what constitutes taxable and non-taxable, that still won’t make it easy on individuals who use payment apps for personal use and still receive Form 1099-K.
So here it goes. Amounts received through payment apps that were personal (such as gifts and reimbursements) will either have to be corrected by the company issuing the form or will have to be adjusted on your tax return.
The IRS advises taxpayers to call the issuing company (their info should be on the 1099-K) and have them correct the amount reported. If, for whatever reason, that can’t be done, you can make the correction on your tax return.
Note: Keep your original 1099-K and all copies of your communication efforts with the issuing company.
To make the correction on your tax return you’ll have to report the amount received on Schedule 1, line 8z. Then, report the same amount on the same schedule, on line 24z. This will fulfill the reporting requirement while also zeroing out the income.
Hopefully this article clarified the biggest confusion about Form 1099-K. If you have other questions the IRS has set up an FAQ page to answer questions about this form.
the Confident Taxpayer 