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Tax laws can change year-to-year, and you shouldn’t have to be a tax expert to understand IRS requirements that may impact you. That’s where Venmo comes in!
As a Payment Settlement Entity, Venmo (and our parent company, PayPal) is required to report payment activity and provide tax documents in certain situations. Read on to learn about this year’s reporting requirements.
Have more questions about how tax reporting works on Venmo? Check out our general Tax FAQ.
IRS Reporting Thresholds for Tax Year 2023
For the 2023 tax year, due to changes to tax laws, the federal tax reporting threshold was $600 for payments received for goods and services.
However, at the end of November 2023, the IRS released Notice 2023-74, indicating an additional delay in implementation of the $600 threshold. This being the case, the reporting threshold for the 2023 tax year will return to $20,000 and 200 transactions. The following states will still use a lower threshold:
Maryland (MD): ≥ $600
Massachusetts (MA): ≥ $600
Vermont (VT): ≥ $600
Virginia (VA): ≥ $600
- Illinois (IL): > $1,000 and 4+ separate transactions
Additionally, Venmo and PayPal will file Form 1099-K for any customer who was subject to backup withholding during 2023, regardless of total payments for the year.
Impact of New Reporting Thresholds for 2023
Money on Hold
- Given the IRS’s initial directive to implement a new $600 reporting threshold for the 2023 tax year, PayPal and Venmo have been placing funds on hold to meet tax requirements when customers do not have a Tax Identification Number on file and exceeded receiving $600 in payments from goods and services.
- Due to the IRS’s November 2023 update delaying the implementation of the $600 threshold, PayPal and Venmo will exempt users who do not meet the revised 2023 tax year federal threshold of $20,000 and 200 goods and services transactions and/or the state threshold. Our team is currently in the process of reviewing all funds that are on tax hold, and a determination will be made in the coming weeks.
Tax Documents You May Receive
- PayPal and Venmo will file Form 1099-K for any customer who was subject to backup withholding during the 2023 tax year, regardless of total payments for the year. This form will include the total amount of backup withholding PayPal or Venmo sent to the IRS on your behalf before the thresholds were changed by the IRS in November of 2023. In the case where an individual state has a lower threshold, PayPal and Venmo will report accordingly.
Customers with Backup Withholding
- PayPal and Venmo withheld money from certain accounts that were missing tax information at a rate of 24 percent, as required by the IRS. We will issue customers a Form 1099-K and they will be able to claim a credit or refund of the backup withholding when they file their own taxes with the IRS. For more information, visit the IRS website here and here.
Concerns About Tax Year 2024
- PayPal and Venmo are closely monitoring for developments and official guidance from the IRS.
IRS Reporting Thresholds for Previous Years
For the tax year 2022 and prior, the IRS used a federal reporting threshold of $20,000 and 200 transactions. Some states had lower reporting thresholds (e.g., $600).
This threshold applies to individuals, sole proprietors, and registered businesses who collected payments for the sale of goods and/or services using Payment Settlement Entities like Venmo (and similar services).
The IRS was initially required to use a lower federal reporting threshold of $600 for the tax year 2022 (and 2023), but ultimately delayed implementation of that change.
