I am sending money to my friend using Cash App personal account, so my friend can pay their medical, legal, and rent expenses that they have been incurring. Using Cash App, I send the money directly to my friend, then my friend pays the providers directly. These amounts exceed five figures $xx,xxx. This is not income to my friend. Will either of us need to account for these money amounts on our tax returns? Will Cash App be required to send a 1099 form to my friend even though this is not income?
You are correct in that the money you are giving your friend is not income to them. However, if that amount exceeds the annual gift exclusion ($17,000 for 2023), you will have a gift tax reporting issue.
The information I have found from CashApp is that they will adhere to IRS guidelines and issue the 1099K to business accounts for 2023. If you account is set up as a personal, not business, you shouldn't receive the 1099.
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Elizabeth W, EA
If you have set up your CashApp for these payments as designated for between friends (personal transfers), you will not likely receive a Form 1099-K. Should a 1099-K be issued nevertheless, you should contact CashApp and clarify that these are not payments for goods or services (but payments between friends), and ask that a corrected 1099-K be issued.
You are correct that this is not income to your friend nor deductible by you. Nevertheless, depending upon the amount of the gift, you may incur a gift tax.
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Since your friend is the person who actually ended up paying for the medical, rent, and legal expenses, he/she can deduct the expenses paid for medical expenses as an itemized deduction, if he/she has enough deductions to itemize. He/she can claim the rent and legal expenses if he/she does indeed have a business to deduct them with.
It is possible that cash app may send your friend a 1099-NEC or 1099-MISC, which would require your friend to report the income. However, that would be a question for cash app regarding if they will indeed send your friend a 1099.
Here is a link for contact information regarding cash app:
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