I have a few questions about the new $600+ Venmo, PayPal, Zelle reporting to IRS (1099-K)

[quil...@gmail.com]

I have read and re-read about the new rule that went into effect in 2022, that PayPal, Venmo, Zelle are now required to report transactions exceeding $600 to IRS. These effects goods & services only, and not friends and family transactions.

Here are a few scenarios / questions that I am trying to figure out regarding the above:

1) As I understand it, if I sell $2,000 dollars of various (used) goods to various different people on eBay, I will be sent a 1099-K now from eBay, as it received the funds from the buyers on my behalf and then forwarded them to me electronically. Am I correct?

2) If I send my child $100 every month via Venmo (for a total of $1,200 for the year), how do I specify in Venmo that this is for Personal / Family – and not for goods. How does Venmo (or Zelle) make the differential in each? Is it based that the sending party has a business account, or this doesn’t matter?

3) Does the new rule mean that if I receive a total of $600+ for all individuals combined per calendar year, or is it $600+ total for each and separate individual that would trigger it? Example: Mary sends me $200 + $200 for a total of $400, John sends me $100 five times time for a total of $500 and Larry sends me $900 as a one-time payment. Does Venmo / Zelle interpret that I have only $900, that requires the 1099-K or is it $400 + $500 + $900 for a total of $1,800? Again, the above example question is for goods or services, rather than friends and family.

Thank you everyone for your input on these questions.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

[ira smilovitz]

On Thursday, January 20, 2022 at 12:34:13 PM UTC-5, quil...@gmail.com wrote:
> I have read and re-read about the new rule that went into effect in 2022, that PayPal, Venmo, Zelle are now required to report transactions exceeding $600 to IRS. These effects goods & services only, and not friends and family transactions.
>
> Here are a few scenarios / questions that I am trying to figure out regarding the above:
>
> 1) As I understand it, if I sell $2,000 dollars of various (used) goods to various different people on eBay, I will be sent a 1099-K now from eBay, as it received the funds from the buyers on my behalf and then forwarded them to me electronically. Am I correct?
>
> 2) If I send my child $100 every month via Venmo (for a total of $1,200 for the year), how do I specify in Venmo that this is for Personal / Family – and not for goods. How does Venmo (or Zelle) make the differential in each? Is it based that the sending party has a business account, or this doesn’t matter?
>
> 3) Does the new rule mean that if I receive a total of $600+ for all individuals combined per calendar year, or is it $600+ total for each and separate individual that would trigger it? Example: Mary sends me $200 + $200 for a total of $400, John sends me $100 five times time for a total of $500 and Larry sends me $900 as a one-time payment. Does Venmo / Zelle interpret that I have only $900, that requires the 1099-K or is it $400 + $500 + $900 for a total of $1,800? Again, the above example question is for goods or services, rather than friends and family.
>
> Thank you everyone for your input on these questions.
>
> --

Before getting too concerned about this, you should understand that receiving a 1009-K doesn't mean that you have to do anything with it. The information reported on the 1099-K doesn't match any amount shown on tha tax return, even for "true" businesses. This is a point that has been raised by the tax professional community. At best, the IRS may have an indication that something is amiss if the 1099-K is grossly different from the tax return. (I'm thinking orders of magnitude different, not a few hundred/thousand dollars.)

1) Possibly. If ebay processes the credit card transactions for you, then yes. If you have your own merchant banking agreement with a credit card company, that company will issue the 1099-K.

2) Unknown. It's possible that specifying that it's a personal/family transaction might be sufficient, but it might not. I expect that the companies will err on the side of overreporting transactions. It doesn't matter what kind of account the sender has. The reporting is based on your receiving more than $600 through the transaction processor.

3) It's the total of all transactions that triggers the reporting requirement. It doesn't matter if it's one transaction for >$600 or 600+ transactions for $1.

BTW, the 2022 form and the instructions for preparing the 1099-K are already available at the IRS website. irs.gov/pub/irs-pdf/f1099k.pdf and irs.gov/pub/irs-pdf/i1099k.pdf. The recipient's instructions are included in the form file.

Ira Smilovitz, EA
Leonia, NJ

[Adam H. Kerman]

quil...@gmail.com wrote:

>I have read and re-read about the new rule that went into effect in
>2022, that PayPal, Venmo, Zelle are now required to report transactions
>exceeding $600 to IRS. These effects goods & services only, and not
>friends and family transactions.

>Here are a few scenarios / questions that I am trying to figure out
>regarding the above:

>1) As I understand it, if I sell $2,000 dollars of various (used) goods
>to various different people on eBay, I will be sent a 1099-K now from
>eBay, as it received the funds from the buyers on my behalf and then
>forwarded them to me electronically. Am I correct?

>2) If I send my child $100 every month via Venmo (for a total of $1,200
>for the year), how do I specify in Venmo that this is for Personal /

>Family - and not for goods. How does Venmo (or Zelle) make the

>differential in each? Is it based that the sending party has a business
>account, or this doesn't matter?

I found a PayPal press release with an FAQ. It says you identify the
payment as for goods and service OR family and friends. If improperly
tagged, the recipient must contact the payment issuer. Isn't that
lovely?

https://newsroom.paypal-corp.com/2021-11-04-New-US-Tax-Reporting-Requirements-Your-Questions-Answered

https://www.paypal.com/us/smarthelp/article/what's-the-difference-between-friends-and-family-or-goods-and-services-payments-faq638

https://help.venmo.com/hc/en-us/articles/1500010381401-Buying-and-Selling-on-Venmo-FAQ

>3) Does the new rule mean that if I receive a total of $600+ for all
>individuals combined per calendar year, or is it $600+ total for each
>and separate individual that would trigger it? Example: Mary sends me
>$200 + $200 for a total of $400, John sends me $100 five times time for
>a total of $500 and Larry sends me $900 as a one-time payment. Does
>Venmo / Zelle interpret that I have only $900, that requires the 1099-K
>or is it $400 + $500 + $900 for a total of $1,800? Again, the above
>example question is for goods or services, rather than friends and
>family.

Depends whether the payment issuer tagged it as a personal gift or
payment for goods and services. If the latter, it's aggregated.

[quil...@gmail.com]

On Thursday, January 20, 2022 at 1:54:13 PM UTC-5, ira.sm...@gmail.com wrote:
> On Thursday, January 20, 2022 at 12:34:13 PM UTC-5, quil...@gmail.com wrote:
> > I have read and re-read about the new rule that went into effect in 2022, that PayPal, Venmo, Zelle are now required to report transactions exceeding $600 to IRS. These effects goods & services only, and not friends and family transactions.
> >
> > Here are a few scenarios / questions that I am trying to figure out regarding the above:
> >
> > 1) As I understand it, if I sell $2,000 dollars of various (used) goods to various different people on eBay, I will be sent a 1099-K now from eBay, as it received the funds from the buyers on my behalf and then forwarded them to me electronically. Am I correct?
> >
> > 2) If I send my child $100 every month via Venmo (for a total of $1,200 for the year), how do I specify in Venmo that this is for Personal / Family – and not for goods. How does Venmo (or Zelle) make the differential in each? Is it based that the sending party has a business account, or this doesn’t matter?
> >
> > 3) Does the new rule mean that if I receive a total of $600+ for all individuals combined per calendar year, or is it $600+ total for each and separate individual that would trigger it? Example: Mary sends me $200 + $200 for a total of $400, John sends me $100 five times time for a total of $500 and Larry sends me $900 as a one-time payment. Does Venmo / Zelle interpret that I have only $900, that requires the 1099-K or is it $400 + $500 + $900 for a total of $1,800? Again, the above example question is for goods or services, rather than friends and family.
> >
> > Thank you everyone for your input on these questions.
> >
> > --
> Before getting too concerned about this, you should understand that receiving a 1009-K doesn't mean that you have to do anything with it. The information reported on the 1099-K doesn't match any amount shown on tha tax return, even for "true" businesses. This is a point that has been raised by the tax professional community. At best, the IRS may have an indication that something is amiss if the 1099-K is grossly different from the tax return. (I'm thinking orders of magnitude different, not a few hundred/thousand dollars.)
>
> 1) Possibly. If ebay processes the credit card transactions for you, then yes. If you have your own merchant banking agreement with a credit card company, that company will issue the 1099-K.
>
> 2) Unknown. It's possible that specifying that it's a personal/family transaction might be sufficient, but it might not. I expect that the companies will err on the side of overreporting transactions. It doesn't matter what kind of account the sender has. The reporting is based on your receiving more than $600 through the transaction processor.
>
> 3) It's the total of all transactions that triggers the reporting requirement. It doesn't matter if it's one transaction for >$600 or 600+ transactions for $1.
>
> BTW, the 2022 form and the instructions for preparing the 1099-K are already available at the IRS website. irs.gov/pub/irs-pdf/f1099k.pdf and irs.gov/pub/irs-pdf/i1099k.pdf. The recipient's instructions are included in the form file.
>
> Ira Smilovitz, EA
> Leonia, NJ

Ira, Thanks for the great and informative responses. I also got these from some other knowledgeable people for others to see. Perhaps they might be helped out by this:

1) Venmo recently added the option for the sender to specify if a transaction is for goods & services. Otherwise it's considered a personal (friends & family) payment. Zelle does not permit goods & services transfers to personal accounts, so any such transfers sent via Zelle are assumed to be friends & family.

2) Zelle is not a goods and services payment processor and is therefor not included in the 1099k $600 limit. They will not issue any 1099k’s.

So I guess use Zelle, if possible and Venmo now has that option to choose WHICH transaction it is. Just need to make sure that friends and family will click the right buttons amongst themselves.

[Rick]

"quil...@gmail.com" wrote in message
news:87cfd95f-1819-49e3...@googlegroups.com...

>
>I have read and re-read about the new rule that went into effect in 2022,
>that PayPal, Venmo, Zelle are now required to report transactions exceeding
>$600 to IRS. These effects goods & services only, and not friends and
>family transactions.
>
>Here are a few scenarios / questions that I am trying to figure out
>regarding the above:
>
>1) As I understand it, if I sell $2,000 dollars of various (used) goods to
>various different people on eBay, I will be sent a 1099-K now from eBay, as
>it received the funds from the buyers on my behalf and then forwarded them
>to me electronically. Am I correct?
>
>2) If I send my child $100 every month via Venmo (for a total of $1,200 for
>the year), how do I specify in Venmo that this is for Personal / Family –
>and not for goods. How does Venmo (or Zelle) make the differential in each?
>Is it based that the sending party has a business account, or this doesn’t
>matter?
>
>3) Does the new rule mean that if I receive a total of $600+ for all
>individuals combined per calendar year, or is it $600+ total for each and
>separate individual that would trigger it? Example: Mary sends me $200 +
>$200 for a total of $400, John sends me $100 five times time for a total of
>$500 and Larry sends me $900 as a one-time payment. Does Venmo / Zelle
>interpret that I have only $900, that requires the 1099-K or is it $400 +
>$500 + $900 for a total of $1,800? Again, the above example question is for
>goods or services, rather than friends and family.
>
>Thank you everyone for your input on these questions.
>

With respect to the eBay question, I believe you are correct that you will
receive a 1099-K for receiving more than $600 through the eBay payment
system. But if, like many people, you are primarily selling used goods
which you originally purchased new, there is a good chance you are selling
these items at a net loss. In that case, I think you can just ignore the
document and not worry about it. On the other hand if you are selling
collectibles or items that have actually appreciated in value, such as rare
books or coins, etc., and you have actually made real income from the sales,
then you would have to report it as income. But in theory, you'd have to do
that anyway, even without the 1099-K.

With respect to your third question, I believe companies like Paypal and
Venmo just look at the aggregate total sent to you, and if it is over $600
they just send one 1099-K. Again, that doesn't mean these numbers represent
income per se. Zelle might be a little different, since they mainly just
facilitate transfers between banks and customers. I'm not sure you'd even
get a 1099-K from Zelle.

Bottom line is if you are receiving actual income you should report it
whether or not you receive a 1099-K. And if you are not receiving income
and you happen to get a 1099-K, I wouldn't worry about it.
--

[ira smilovitz]

On Thursday, January 20, 2022 at 5:34:15 PM UTC-5, Rick wrote:
> "quil...@gmail.com" wrote in message
> news:87cfd95f-1819-49e3...@googlegroups.com...
> >

>

> Bottom line is if you are receiving actual income you should report it
> whether or not you receive a 1099-K. And if you are not receiving income
> and you happen to get a 1099-K, I wouldn't worry about it.
> --

Stated much better than I did.

Ira Smilovitz, EA
Leonia, NJ

[Ian Pilcher]

On 1/20/22 16:33, Rick wrote:
> With respect to the eBay question, I believe you are correct that you
> will receive a 1099-K for receiving more than $600 through the eBay
> payment system.  But if, like many people,  you are primarily selling
> used goods which you originally purchased new, there is a good chance
> you are selling these items at a net loss.  In that case, I think you
> can just ignore the document and not worry about it.

Right up until you're asked to prove the net loss.

--
========================================================================
Ian Pilcher arequ...@gmail.com
-------- "I grew up before Mark Zuckerberg invented friendship" --------
========================================================================

[Rick]

"Ian Pilcher" wrote in message news:su5vfu$h3p$1...@dont-email.me...

>
>On 1/20/22 16:33, Rick wrote:
>> With respect to the eBay question, I believe you are correct that you
>> will receive a 1099-K for receiving more than $600 through the eBay
>> payment system. But if, like many people, you are primarily selling
>> used goods which you originally purchased new, there is a good chance you
>> are selling these items at a net loss. In that case, I think you can
>> just ignore the document and not worry about it.
>
>Right up until you're asked to prove the net loss.
>

Given the sheer number of eBay sellers likely to receive this form and not
reporting income, I doubt the IRS will bother most of them, especially in
the lower dollar amounts. If you're generating a lot of eBay dollars
without reporting income, then it certainly makes sense for you to keep
really good records on what you're selling. I get that most people may not
have records on items they bought 10 or 20 years ago, but just do the best
you can in keeping a list of what you sell with a description and the
approximate date when you bought the item. In the unlikely event you get
audited and you can show you are selling used items you've owned for a while
at a price that most people can see is below what you would have paid,
you'll be fine.

--