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Level 1
posted Jun 28, 2023 11:09:39 AM

Personal Cash App Payments

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? 

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3 Replies
Employee Tax Expert
Jun 28, 2023 11:14:04 AM

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.

 

https://cash.app/help/US/EN-US/6524-form-1099k-qualifications#:~:text=Cash%20App%20is%20required%20to,is%20processed%20in%20card%20payments.&text=Illinois-,Cash%20App%20is%20required%20to%20issue%20a%20Form%201099%2DK,and%20more%20than%203%20transactions.

 

If this information was helpful, please indicate by clicking the thumbs up below.

Elizabeth W, EA

Employee Tax Expert
Jun 28, 2023 11:15:29 AM

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. 

Employee Tax Expert
Jun 28, 2023 11:15:48 AM

Hi,

 

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:

https://cash.app/legal/us/en- 

us/cashappterms#:~:text=You%20can%20also%20call%20us,or%20full%20debit%20card%20number 

 

Thank you,

John 

CPA