Important Update for Users of Cash Apps!

Two people's hands, holding phones, one sending money and one receiving money via a cash app

by Harry Galstian

February 21, 2023

The IRS has postponed the 1099 reporting requirement for cash app companies, such as Venmo and PayPal, due to confusion caused by the new program. As a result, the requirement for these companies to issue 1099s to their users has been delayed for one year, until the 2023 tax period.

We previously reported that the IRS had mandated companies such as PayPal and Venmo to start issuing a form 1099 and report payments that were made through these apps that totaled $600 or more during the calendar year. This new requirement applies only to business transactions, such as payment for services rendered by a plumber or freelance writer, and not to transactions between friends paying each other back for dinner, for example.

The IRS is working to reduce the tax gap, the amount of taxes that go unpaid each year due to non-reporting. Whether an individual receives a 1099 form or not, income that they generate from side gigs is considered business income, and must be reported on a 1040 tax return.

Hopefully these cash app companies will update their systems to accurately implement the updates and issue 1099 forms to users who are conducting actual business activities. Using a professional tax preparer to file your taxes can also minimize the risk of errors, as they receive ongoing education each year to keep up with the latest tax laws.