I have an elderly relative that is going through touch financial times in Puerto Rico. I was wondering if I sent money to her throughout the year when I can, through PayPal or CashApp, does she have to report this income to the IRS? Any tax implications on anyone? Is there a limit on how much she can receive, until she has to report? Thank you for your help in advance!
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No. The income she receives is not income to your family member. Money received through one of these third party financial apps is taxable only if it is received for sales, services, where there is a profit motive.
The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.
It will be very important to keep a list of payments received to document proof of non-income payments. The IRS requires reporting for anyone who receives payments that exceed $600 for 2023.
If you transfer with Zelle, Zelle says they do not issue any 1099-K because they are not required to do so.
No, you will not have to report Cash App or PayPal for shared expenses, etc. as outlined below.
Cash App and Form 1099-K FAQs
In 2022, Congress made changes to the Internal Revenue Service’s (IRS) reporting requirements for the Form 1099-K. You have questions, we have answers.
What were the recent changes to the IRS reporting requirements?
The American Rescue Plan Act of 2021 changed the minimum reporting threshold for certain transactions. The IRS planned to require services like Cash for Business to report payments for goods and services on Form 1099-K when those transactions total $600 or more in a year, starting January 2022.
On December 23, 2022, the IRS announced a one-year delay for the new $600 reporting threshold for Form 1099-K.
Instead, you will receive a Form 1099-K for your Cash for Business account for 2022 if you received more than $20,000 and more than 200 business transactions within a calendar year. Your state may have a lower threshold.
These reporting requirements do not apply to personal Cash App accounts because these transactions are for personal, non-commercial purposes. If you have a Cash for Business account, check out Tax Reporting for Cash For Business for more information.
How these new tax reporting changes may impact you when paying or accepting payments with PayPal and Venmo for goods and services?
Update December 30, 2022
The IRS has recently announced a delay in implementing the $600 reporting threshold for goods and services transactions, reverting the 2022 requirement for Form 1099-K reporting back to the 2021 figures (total payments exceed $20,000 USD and there are more than 200 transactions). This means that similar to prior years, PayPal and Venmo will continue to follow these IRS reporting thresholds. In the case where an individual state has a lower threshold, PayPal and Venmo will report accordingly. We will provide further updates when more information is available. This information is not intended to be, and should not be construed as, tax advice. You should consult your tax advisor regarding your reporting obligations.
Update March 4th, 2022
Recently, there have been some questions regarding changes U.S. tax reporting requirements that could impact the information PayPal shares with the Internal Revenue Service (IRS) about transactions made using PayPal and Venmo for the sale of goods and services. We’ve answered some of the most pressing questions below – and we’ll be sure to keep this list updated as more details are finalized.
Beginning January 1, 2022, the Internal Revenue Service (IRS) implemented new reporting requirements for payments received for goods and services, which will lower the reporting threshold to $600 for the 2022 tax season, from 2021’s threshold of $20,000 and 200 transactions. Here’s some more detail:
@bebashali27
Thank you! So to confirm "The IRS requires reporting for anyone who receives payments that exceed $600 for 2023." This is only for when receiving money for goods and services. If I send her a total of $700 in the year to help her out, she doesn't have to report this.
Correct. The funds you send to a friend or family member are considered 'gifts' and don't need to be reported (unless it exceeds $16,000!).
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