The New IRS 1099K Rules Starting 2024: What You NEED TO KNOW

1099-k irs taxes

If you're using payment apps like PayPal, Venmo, or Cash App, you need to pay close attention.

As you probably know, the IRS has made some major changes to the new 1099K reporting rules, and it could have serious implications for you as far as IRS tax reporting goes.

But don't worry, I've got you covered. In today's blog post, I'm going to break down the new IRS 1099K rules and explain why Zelle, also known as Chase QuickPay, might just be the best payment app for you personally and for your business.

This information could save you from some major headaches down the road, so keep reading!

Latest IRS Updates: The New 1099K Rules Starting 2024

Alright, let's talk about the big changes coming from the IRS. Starting this year in 2024, Payment processing companies like PayPal, Venmo, and Cash App are now required to file a Form 1099K for any users who earn more than $5,000 through their payment apps.

This means if you're using these apps for personal or business transactions, your earnings will be reported directly to the IRS, and it doesn't stop there. This $5,000 threshold is only for 2024. In 2025, it's set to drop even lower to just $600.

Yes, you heard that right.

Unless our lawmakers do something, the $600 threshold is coming for 2025. This means even more of your transactions will be reported to the IRS.

1099-K Threshold Change: If Your Earnings Cross $5,000

Next, let's put this in a perspective with an example. Imagine, you're an artist selling paintings online and accepting payments through Venmo.

Now, under these new IRS rules, as soon as your earnings cross the $5,000 mark for 2024, At tax time, Venmo will send a Form 1099k to you and to the IRS on your behalf. This means the IRS will be aware of your earnings. It's something to be aware of.

What If You Got 1099K For Personal Transactions?

How about personal payments from family and friends? Money you get from family and friends as a gift or repayment for personal expenses shouldn't be reported on a Form 1099k. These payments aren't considered as taxable income.

For example, if you're splitting the cost of a car ride or a meal, getting birthday money, or being reimbursed for something, those payments are not taxable and should not be reported on a 1099K.

Just be sure to mark these payments as non-business in the payment apps whenever you can.

The IRS Delays The New $600 Reporting Rule

As you can imagine, many people are not happy with these new rules. In fact, there was such a strong backlash last year that the IRS decided to hold off on lowering the 1099K threshold to $600 for 2024, opting to wait until 2025 instead.

This gives people a bit more time to adjust, but it's clear that the IRS is serious about increasing tax collections on money earned through these payment apps.

Is Zelle Required to Submit a 1099K to the IRS?

So what does this mean for you? Now, there is an interesting loophole. Unlike PayPal, Venmo, and Cash app, Zelle is not required to send a form 1099K to the IRS when you receive more than $5,000 in earnings through their payment platform.

Why is this?

It's because Zelle never actually controls your funds. It simply facilitates the transfer of money directly from one bank account to another. So it acts more like a conduit rather than a custodian. This important difference makes Zelle exempt from the new 1099k reporting requirements.

But remember, even though Zelle doesn't report your earnings, you're still obligated to do so, whether you receive a tax form or not.

Why Zelle (Chase QuickPay) May Be The Best Payment App For You

Given the new 1099K reporting changes, my advice is to avoid using payment apps for any payments for goods or services, especially for your business. This helps to avoid commingling personal and business transactions.

Consider using traditional methods like checks, cash, ACH transfers, wire transfers. If you must use an app, use Zelle, which is also known as Chase QuickPay. With Zelle, you can bypass the new 1099K reporting requirements. There's no fee to use Zelle. It's fast and transactions are private.

How to Report 1099K Transactions On Your Tax Return

If you want to know how to report 1099K transactions on your tax return, you can check on my video here or my entire 1099K playlist here.

As always, thanks for reading, and see you in the next blog post!

About The Author

Noel Lorenzana is an Illinois-licensed, Registered Certified Public Accountant with over 20 plus years of experience.

Through his online educational content, YouTube videos, easy-to-understand courses and 1-on-1 consulting, he gives you the tools to become tax savvy for yourself. 

Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.