Ep. 136 | Unpacking the Venmo Tax
Download MP3Hey, everyone, and welcome back to the teaching tax full podcast episode 136 today. We are looking at Venmo. Yes. You heard it right. Venmo, one of the most popular payment peer to peer business to business transaction DIY platforms out there.
John Tripolsky:But what we're looking at today are some twenty twenty five rules that the IRS has in place and how they look at this platform and there are similar ones out there. But before we do that, as always, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody, and welcome back to the podcast. Now today, we're gonna talk about a topic I know Chris Piquiro is extremely, extremely excited about. I'm just kidding. He's not too excited about it. Who is really excited about talking about a topic?
John Tripolsky:Right? If you're getting any revenue, say, who wants to be taxed on that? Right? So we're gonna talk about a lot of these stuff or should say a little bit about it because there's a lot of stuff going out there about it, but we just wanna give you really the the nuts and bolts, if we will, around platforms such as Venmo. You have PayPal.
John Tripolsky:Cash App is one of them, and there's a whole ton of these things out there. So what we're gonna get into, again, not too deep into the weeds, but what you can expect a little bit about some changes from the IRS as it relates to these platforms. So as I mentioned, I know it's his favorite topic to discuss. Chris Pacquiro, welcome back, buddy. How's it going today?
Chris Picciurro, CPA:It is going very well. How are you doing today?
John Tripolsky:Doing good, man. Doing good. I I did not you know what? I should say, I will Venmo you a couple bucks for doing this topic with me. I know.
John Tripolsky:I know. And I know you're not excited about it because there's a million other things in your world that excite you way more than this.
Chris Picciurro, CPA:That's true. But you know what? We have to think about the teaching tax flow community and what's best for them, and this is something that's gonna affect a lot of them. As you know, first of all, thank you so much for watching. Thank you for listening.
Chris Picciurro, CPA:We truly appreciate you. Without you, we wouldn't be doing this. We want you if you're not already, we want you in the defeating taxes private Facebook group. Go to defeatingtaxes.com. Remember, you can always post anonymously.
Chris Picciurro, CPA:The other thing, which I'm gonna call it this is our fuel tank, John, our YouTube channel. Teaching Tax Full YouTube channel, that's our fuel tank. So please pump some gas in our fuel tank. Guess what? It's gonna be free gas.
Chris Picciurro, CPA:It's not like what you're paying at the pump right now. All you have to do is check it out, give us a like, and, and a follow because that helps us bring you the content. And this makes me maybe tackle some topics that aren't my personal favorite, but I know that the community needs it. So, so thank you, first of all. We are loving all the interaction.
Chris Picciurro, CPA:And, you know? And then and and, again, if you have any questions about this, go to 2025.tax. Just drop an inquiry in. We're happy to help. Now this topic, we call it the Venmo tax.
Chris Picciurro, CPA:Social media calls it the Venmo tax. But but what this is is it's something that has come about over the last few years with IRS. It's a topic that we actually taught, in our tax season updates. I'm very honored to be one of the National Association of Tax Professionals instructors. I got a chance to speak to about three to 400 tax professionals last year.
Chris Picciurro, CPA:I think we're gonna probably hit more than that this year. And this was a topic. So peer to peer, tax professionals are also learning about this topic and educating ourselves. When I taught this topic, I like to call it the Taylor Swift tax. Now, Taylor is to the best of my knowledge and, because I have a fifteen year old daughter now that gives me updates.
Chris Picciurro, CPA:She is now focusing, or she is now not on tour anymore, so I don't know that I can call it the Taylor Swift tax. Maybe we'll find something else. Maybe we'll call it the Savannah Banana or the, some other touring organization's tax. And you might say, well, why is that? Well, let me paint a picture for you, John.
Chris Picciurro, CPA:Let's well, I know you're a Swifty. You've been outed many times as a Swifty. It goes along with some of your other questionable music choices, which will remain unnamed. But let's say John says, you know what? My daughter's daycare.
Chris Picciurro, CPA:I'm getting all the dads together, and we're gonna go to the Taylor Swift concert. And it's a very expensive concert to go to, but so he buys 10 tickets, and for $300 a ticket.
John Tripolsky:That's a steal.
Chris Picciurro, CPA:It is a steal, actually. And and then he's he just says tells the other dads, don't worry about it. Venmo me $300 for your ticket. No big deal. John's not in the business of taking groups to the t sizzle concert or doing special events.
Chris Picciurro, CPA:However, there's an unintended consequence. John will now get a $10.99 at the end of the year, most likely, because of his Venmo activities. And there's a lot of innocent things happening out there that that are reporting nightmares for taxpayers. I'll give you a couple more examples that I have personally witnessed in our private CPA firm. One, the Cub Scout popcorn or Girl Scout cookie, leader.
Chris Picciurro, CPA:Right? You go to Kroger. You go to my you go to your grocery local grocery store. You buy either Girl Scout cookies or Cub Scout popcorn. You Venmo someone, and it's typically one of the parents of the participants.
Chris Picciurro, CPA:And they bring in thousands and thousands of dollars of Venmo. They're not in the business of peddling popcorn or cookies, and they transfer that money over to the organization to purchase said, product. They haven't made no money. They're not in the business of doing it. However, they could very well be getting tax forms in the mail.
Chris Picciurro, CPA:That can happen all the time. The final one I'll talk about is for those of you that play fantasy football, or let's say you are in a pickleball league. Our our pickleball league, we is a is a couple hundred dollars a year total to be in, very modest, but we've got about 90 guys in the league. That's a significant amount of Venmo transactions occurring for no real profit for the person organizing it. So that is those are the unintended consequences of what we call the Venmo tax.
Chris Picciurro, CPA:So what are the rules? Well, we know that these digital payments have become more popular and popular, and the IRS is seeing that there could be income that is going unreported. Now we call the Venmo tax. John, you remember when we were kids of course, I'm a couple years older than you, and you happen to, enjoy reminding people that I'm a decade older than you, although you just look odometer. But so we would say, hey.
Chris Picciurro, CPA:Can you pass me a Kleenex? Can you throw me a Coke? Right? We know Kleenex is really a facial tissue. So we know Coke is a soft drink.
Chris Picciurro, CPA:John, we're from Michigan, we call it pop. People down here in the South call it soda.
John Tripolsky:Mhmm.
Chris Picciurro, CPA:I don't understand that, but that's a whole another episode.
John Tripolsky:I love I love throwing people a curveball. When I lived in when I lived in South Carolina, it's like, oh, is it a soda pop then? They're like, well, no. It's just soda. Well, to me, it's just pop, so I'm I'll compromise.
John Tripolsky:But
Chris Picciurro, CPA:Exactly. And a lot of people say, hey. I'll have a Coke. They might have a Pepsi. They might have an RC Cola.
Chris Picciurro, CPA:It's the point is when we say the Venmo tax, it applies to Venmo, PayPal, Cash App, and several other what what are called TPSOs, third party settlement organizations. Alright? And these are the organizations that collect money from one party, transfer it to the other party. And now here in 2025, a new threshold for, ten ninety nine k reporting does take effect. A ten ninety nine k is the tax form that is required if you go over the threshold for for third party network transactions.
Chris Picciurro, CPA:So we'll put a link into the show notes to a ten ninety nine k, and, technically, it's a payment card and third party network transactions tax form. So there are a lot of people that are doing some what we call innocent activities. You know, there's Giant, when your daughter's getting older, you're gonna realize as you and your wife I know you're very involved with the community, but and you're gonna continue to realize that no good deed goes unpunished. That is a % true. So as you volunteer for things and, hey.
Chris Picciurro, CPA:You know, I'll be classroom dad or the classroom mom and Venmo me money for the teacher gift, and all of sudden, I've got a tax form. So the but the the $10.99 k is a tax form you can you will receive if you go over what we call the threshold. And that threshold did change in for 2025. It actually got reduced. Throw what the what threshold means is that if you go over that dollar amount in these TPSO transactions for the year, you will receive a ten ninety nine k.
John Tripolsky:And I'm really glad, Chris, that you did go over to it before we discuss what those thresholds are actually. So I'm glad that you brought up that Kleenex example. Right? Because I I feel like there's these platforms are so user friendly. Right?
John Tripolsky:It's like, I wouldn't say careless or anything done well, let's be honest, people are using them maliciously. Whatever. It is what it is. It can't stop everybody. But it's been it's almost like part of our daily lives.
John Tripolsky:Right? Where nobody I was gonna say nobody, but I I can't tell you the last time I've actually even given any form of currency tangible to somebody, you know, somebody splitting a lunch bill or or something like that. Right? So these platforms are out there, and people are using them more and more and more. And I would probably bet I'm just gonna randomly come up with a number that probably less than, like, 1% of people that even use them know that this is even a thing.
Chris Picciurro, CPA:Absolutely. I mean, John, I'm just I've been thinking about just in the last month. We my wife and I used Venmo to tip a we we a valet driver when we went out to to, dinner one night. You know, we're we're not John, I'd rather walk a few blocks, but we were in Downtown Nashville, you know, and, kinda dressed up. So we had, you know, tipping of tipping a someone at a hotel that's helping you with your bags, typically Venmo.
Chris Picciurro, CPA:I've got another example. We this this restaurant will not be named. If you wanna know, though, and you're in Franklin, Tennessee, if you wanna know the Mexican restaurant, best margaritas by far, John Trapolski Trapolski has graced this place with this presence. The one drawback, which could be a positive, is bad Wi Fi. It's probably not
John Tripolsky:They are missing well, me and you are are, like, notorious for finding ways to drag our laptops and our business conversations to the most non business friendly establishments. But, yeah, that one I was disappointed in, man. Nothing's better than, like, salsa and Wi Fi. Right?
Chris Picciurro, CPA:Like But
John Tripolsky:that's supposed to go.
Chris Picciurro, CPA:Know. It was salsa. You you get a little salsa on your computer. And, John, we've been to this establishment many times. In fact, one time, it's quite quite a it was it was the anniversary of the establishment.
Chris Picciurro, CPA:They had really good deals on margaritas. They had a bunch of outdoor seating, and it was it was a very interesting experience. We'll say that. But we're gonna leave that has nothing to do with $10.99 k, but here's why it does in in all seriousness. Because my wife and I like to go to this set establishment, we received gift cards from people to this establishment.
Chris Picciurro, CPA:So when we went to use our gift cards, no problem, we cashed out, we paid for our meal, and we wanted to put a tip on it. Well, they said, just with our computer system, you can't tip using your gift card, which is kinda weird. Usually, can. Well, we don't carry cash, and this poor server just helped us. So we we asked him, and he's like, oh, yeah.
Chris Picciurro, CPA:Do my wife says, do you have Venmo? Yeah. Can we at least Venmo you a tip? Sure. No problem.
Chris Picciurro, CPA:But think about that. We had to tip this server in Venmo. Who knows how many times that that kind of stuff happens? So Right.
John Tripolsky:It's just like live music venues. I feel like everybody that hits a stage, that's, like, their their way to do it. That's like a a request the old request buckets. You know, where you drop a piece of paper, write a folder in there, throw it in. Now it's like, don't tell us your song unless you Venmo us.
John Tripolsky:Correct.
Chris Picciurro, CPA:So as early as 2023, the threshold. So when you're as you listen to this, think about threshold is when I have it doesn't mean that's when you have to report something. We're gonna talk about that in a couple minutes. It means when you're going to receive the ten ninety nine k form. That threshold for 2023 was $20,000 of transactions and 200 of minimum transactions.
Chris Picciurro, CPA:Okay? So that kinda, eliminated a lot of people from getting the ten ninety nine k. In 2024, it was 5,000 of transaction of of report, transfers or transactions, and there was no minimum transaction. So it's solely based on the amount of transactions for 2025. Only $2,500.
Chris Picciurro, CPA:So you could easily see how that can happen, especially man, I mean, think, John, think about, like, going out to how many times have you guys gone out to dinner with, like, four or five couples? Someone, you know, puts it on their car, and then everyone Venmo's the money. It can $2,500 can add up pretty pretty quickly over the year, and then you have a ten ninety nine k. And here's the kicker. In 2026, that threshold dips down to $600.
Chris Picciurro, CPA:Now we'll see if the patch comes through. It has happened quite often because you gotta imagine these third party settlement organizations really don't wanna issue all these ten ninety nine k's and track everything. But that those are the rules for when a ten ninety nine k is issued. Now I'm gonna pause for a quick second. The issuance of a ten ninety nine k doesn't dictate if if something's taxable or not taxable.
Chris Picciurro, CPA:It really is plays a role in how we handle our tax return if we're issued a ten ninety nine k and we're not in the business of of doing something that we should be reporting that as taxable income.
John Tripolsky:Mhmm. And and really, Chris, I mean, I can see this, you know, to to kind of play devil's advocate a little bit for the IRS. Right? So anybody that's listening to this as a tax player, please do not, you know, knock me over on the street for saying this. But, really, I wouldn't say it's I'm not gonna say it's a good idea all the way around.
John Tripolsky:But for them, it's a very beneficial tool and a move, I think. I mean and I don't know how I feel about the number, obviously, or the number of transactions. But think about it. Right? Like, you have garage sales doing a couple thousand dollars.
John Tripolsky:You have people selling things on marketplace. You have all this stuff. You you have some companies I know for a fact paying their contractors with Venmo or PayPal or something. So it's smart on their part again to kinda really look at this as like, okay. This is really flying under the radar.
John Tripolsky:We know it. How are we gonna, you know, collect on that, basically?
Chris Picciurro, CPA:Right. I mean, think about garage sales. When we were a kid, we would have three, four families coming together and have one monster garage sale. And and, of course, there was no Venmo then. But now you would probably have one Venmo account, and people are shifting money back and forth.
Chris Picciurro, CPA:So, again, ten ninety nine k reporting is autonomous from reporting it as taxable income. But if you get a ten ninety nine k, you have to deal with it, or you will probably get a letter from the IRS, and they are not going to give you the benefit of the doubt. They're going to tell you, say that it's taxable income. So remember, you have to re you report as a US tax resident. You report your gross income.
Chris Picciurro, CPA:You report rather your income from all sources. So when we talk about these ten ninety nine k's, which of these transactions are actually taxable? So which ones are reported as taxable income on your tax return? I'm gonna give you four most common examples. One is gonna be your freelancers.
Chris Picciurro, CPA:We you know, we love our freelancers, our gig workers here in teaching tax flow. So it could be a tutor. It could be, anyone doing some side hustle, rather, you know, some so in in segue of gig economy and side hustle. So you got freelancers are kinda separate than, you know, side hustles and gig economy, Uber, DoorDash, those kind of things. A lot of times, those are people are paid, tipped, and in Venmo.
Chris Picciurro, CPA:If you're selling goods for a profit. So let's you know, John, there's a rumor that we might, you know, we might be writing a teaching tax flow book. If we sell it on online and get Venmo, then we that's a good sold for profit. That's taxable income. If you're selling things on Facebook Marketplace for profit, that is taxable income.
Chris Picciurro, CPA:If you sell your kid's old bike, that's not that's that's not a taxable income. It's just it's kinda like a garage sale situation. But you might sell you know, you've gotta look at the situation, and are you selling things for income and professional services? So those are all things that are typical, transactions that occur on a ten ninety nine k that are taxable. Now there could be some nontaxable reporting, and that's where it gets sticky.
Chris Picciurro, CPA:You get a ten ninety nine k, and you're not in the business of of selling things, but you just happen to receive one due to a a variety of reasons. The top three ones are gonna be personal reimbursements. Like I said, splitting. Here's a great one, John, splitting rent. Right?
Chris Picciurro, CPA:Let's say you and I rented a condo and and you Venmoed me a grand a month, and I paid the $2,000 of rent. I'm gonna get a $10.99 k. I'm not in the I'm not a landlord. We're just sharing expenses.
John Tripolsky:I can only imagine the, like, the volume of transactions that you talked about a little bit earlier. I mean, I don't personally, I don't use Venmo a whole lot. I just, you know, call my wife and say, hey. There's $50 at the counter. You Venmo somebody.
John Tripolsky:But it's like, if you're in college, if you're at a college campus, hitting a hitting two to 500 transactions is I mean, you probably do that in a semester. Like
Chris Picciurro, CPA:Right. And now it's just a matter of the now it's on if you have one transaction for $2,501, you're gonna get the $10.99 k. Yeah. The splitting of expenses. Because think about something real quick.
Chris Picciurro, CPA:Let's say, John, you, let's change the facts on. Let's say you bought a con let's say you bought a condo because, like, your your real life situation. You and you put it on e Airbnb, and you and you rented it out on Venmo, or you rented it out as a short term rental. I mean, if you went through Airbnb, don't know if that that venue Venmo you. But the point is now you're in a for for profit activity.
Chris Picciurro, CPA:So the tax reporting is completely different than splitting an expense. So you have to dive into what that activity is. But $10.99 k's, hey. You you could definitely get one just due to personal reimbursements. It could be gifts between family and friends.
Chris Picciurro, CPA:I mean, you could have a benevolent grandparent that gifts you $3,000 easily. That's not taxable. Or transfer between personal accounts. What if you're transferring money from your personal account into Venmo or vice versa? So now what do you do, John?
Chris Picciurro, CPA:What do you do if you receive a $10.99 k and you are not in business?
John Tripolsky:And really, Chris, with this too, it's, you know, it's great that they kind of separate. Right? Taxable and nontaxable. If they didn't do the nontaxable side, I think we have a whole other situation on our hands. But really, at the end of the day, even if everything you do is nontaxable throughout a year, right, it does add that layer of complexity to filing your returns accurately.
John Tripolsky:Right? So I can see this being a thing and now playing devil's advocate on the taxpayer side. Right? Like, what a great tool, though, that we have these. Because, basically, now the individual can in theory, you're being able to accept credit card, debit cards, even even though, you know, someone's loading their account and then it's transferring to you.
John Tripolsky:But, like, it really has pushed us from a little bit more of a cashless, you know, economy, really, in a sense. Right. So it's the technology, I think, is incredible. I think it's great how now it interacts with things. I love it, of course, because my local hardware store, you know, now even lets me do Apple Pay, so I'm excited about that.
John Tripolsky:And I get points back on it too, so I'm a happy camper. But Well,
Chris Picciurro, CPA:you gotta think about that. Remember, everyone has to pay tax, should you know, has to report their income. So if you're in the business if you're in business, if you get paid on Venmo or not, you should be reporting all your income on your schedule. See if you're self employed or or let's say you're selling personal assets that are for capital gain or loss, you still might be reporting in on schedule d. What happens if you get a ten ninety nine k and it's simply let's think about their roommate example.
Chris Picciurro, CPA:Right? Or the cookie example or the popcorn example. The first thing you should do is you should contact the TPSO and let them know, hey. I shouldn't have gotten a ten ninety nine k. I'm not in the business of selling Cub Scout popcorn or, you know, pickleball league funds.
Chris Picciurro, CPA:That being said, the chances that the TPSO are gonna, in a timely fashion, change their reporting might be small. So if you do get one, my best advice would be put it on your tax return as other income, and then back it out for the same amount and simply write the explanation with your tax return, $10.99 k $10.99 k received in air funds, simply a expense sharing between friends. Don't just not put it on your tax return.
John Tripolsky:Absolutely. Absolutely. And I think this is really good for us to, you know, dive into and cover again because there's so many people that use this. Right? And another bonus to this just being in existence, right, not the reporting side of it, but just the technology, right, is now you can't have somebody really, like, couch surfing at your place anymore saying, like, oh, I forgot my wallet.
John Tripolsky:Be like, I've seen you on your phone, man. Like, I see you. So, you know, shoot me my $25. You've owed me for something.
Chris Picciurro, CPA:Absolutely.
John Tripolsky:And it is great. And, yeah, Chris, I'm I'm glad that we kinda, you know, wrangled you into this one. I know you had a have many other topics, as I mentioned, that are way more exciting to you. But as you alluded to at the beginning as well, so many of our community members use this. I mean, down to really younger chill I wouldn't say children.
John Tripolsky:I don't know what act I mean, is it like a certain age to actually have a Venmo account? I'm sure. You know, all the way up to, you know, people who have more than enough money to pay for stuff or could use to carry a wad of cash in a rubber band. You know? Now they're using something like this.
John Tripolsky:So it's great that we went over this. And, yeah, those you know, I guess we'll kinda sit tight and ride the pine and see where things go if if that changes. Right? The little patch you mentioned.
Chris Picciurro, CPA:Exactly. Or if it goes if it goes down to $600 threshold as expected, we're gonna have a lot more reporting, and that's why there's no such thing as an easy tax return.
John Tripolsky:Oh. On that note, we should make one of these days like hug your favorite CPA day or something like that. But take care of your tax professional because they take care of you. But awesome. Hopefully, you guys enjoyed this topic.
John Tripolsky:Again, we always welcome any ideas you guys have. Any questions you have, shoot them over. That's where we get this content from as Chris had mentioned as well. And as always, we look forward to our next topic on the Teaching Tax Flow podcast next week. Different date, same day of the week, Completely different topic.
John Tripolsky:Have a great week, everybody.
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