The IRS Is Watching Your Venmo

At Victory Tax Lawyers, we help clients navigate complex tax issues, from audits and back taxes to liens and fraud investigations.

If you’re unsure whether you need expert help, call (800) 883‑8301 for a free consultation.

💬 Why the IRS Cares About Peer-to-Peer Payments

Apps like Venmo, PayPal, Zelle, and Cash App make it easy to send money, but that convenience blurs the line between personal transfers and business income.

The IRS sees it this way:

• Personal payments → Not taxable
  (splitting bills, gifts, reimbursing a friend, paying a roommate)
  

• Business payments → Taxable income
  (freelance work, small business sales, side-hustle payments, online marketplace transactions)

If an app treats your transfer as “goods and services,” the IRS sees it as business revenue,  even if you personally think it’s not. Victory Tax Lawyers has helped thousands navigate IRS letters tied to P2P reporting, and if you need clarity, call (800) 883-8301 for a confidential consultation.

🔎 The Current Reporting Threshold: $20,000 + 200 Transactions

After several delays and legislative changes, the One Big Beautiful Bill Act (OBBBA) officially returned the 1099-K reporting threshold to $20,000 and 200 transactions, starting in tax year 2025.

This means:

• If you receive over $20,000
  
  

• AND complete more than 200 transactions for goods or services in a calendar year…

…the platform must send Form 1099-K to you and the IRS.

⚠️ Important: You must still report taxable income even if you never receive a 1099-K.

📱 How the IRS Treats Each Platform

Here’s a quick breakdown that taxpayers often misunderstand:

Venmo

• Issues 1099-K if you cross the reporting threshold.
  

• Personal transfers are not taxable.
  

• Business payments must be reported (even without a form).
  

PayPal

• Same rules as Venmo (PayPal owns Venmo).
  

• States like Maryland and Virginia may have lower thresholds. Make sure you understand what they are if you live in either state.
  

Zelle

• No 1099-K issued because Zelle doesn’t hold funds.
  

• IRS still expects you to self-report business income.
  

• Lack of reporting makes record-keeping even more critical.

🧾 How the IRS Tracks P2P Transactions

Many taxpayers assume, “If I don’t get a 1099-K, the IRS doesn’t know.”

That is false.

The IRS uses:

• Platform-submitted data
  

• Algorithms that detect unusual patterns
  

• Bank record matching
  

• Audits triggered by inconsistent reporting

If your tax return doesn’t match inflows labeled as business activity, the IRS will question it.

💰 What’s Actually Taxable?

To stay compliant, follow this rule:

If someone pays you for work, goods, or services → It’s taxable income.

Examples of taxable P2P income:

• Freelance projects
  

• Consulting
  

• Selling products
  

• Side-hustles (art, tutoring, reselling)
  

• Rental income
  

• Marketplace sales (Etsy, eBay, etc.)
  

Examples of non-taxable transfers:

• Gifts
  

• Reimbursements
  

• Cost-splitting
  

• Personal support
  

• Loans you intend to repay

Want to know the best practices for staying out of trouble? Head to our website to read the full blog post→

⚠️ Unsure About Your P2P Reporting?

You’re not alone – this is one of the most confusing areas of IRS compliance. And the agency is paying closer attention than ever.

Victory Tax Lawyers has helped clients resolve over $85 million in tax issues, including audits, underreporting, and 1099-K discrepancies

Call (800) 883‑8301 or request your free consultation today. Don’t wait, get the expert help you deserve. Book a Consultation →