Using Venmo, Cash App, or PayPal for business payments? You could owe taxes—even if you didn’t realize it.
As of 2025, payment platforms must issue Form 1099-K if you receive over $5,000 in business transactions (recently raised from $600).
✅ Best Practices for Business Owners
- Label payments clearly. Misclassified payments can create tax reporting issues or IRS scrutiny.
- Separate business from personal. Set up a business profile or use a dedicated account to avoid confusion.
- Track fees and expenses. Payment platforms take processing fees, which are deductible business expenses.
- Keep clean records. The IRS is increasingly focused on digital transactions. Good bookkeeping protects you in case of an audit.
It’s critical to understand the tax implications—especially with IRS rule changes taking effect.
🧾 1099-K Reporting Rules (Updated for 2025)
Third-party payment apps like PayPal, Venmo, and Cash App are required to send Form 1099-K if your business receives over $5,000 in payments during the year.
This is part of a phased rollout by the IRS. Originally set to drop to $600, the threshold has been temporarily increased to $5,000 in 2024 and 2025 to ease the transition.
📌 Key Point: Even if you don’t receive a 1099-K, you are still legally required to report all business income.
Tip: Platforms like PayPal and Cash App deduct fees—track them, they’re deductible business expenses!
🚨 Upcoming Considerations
The IRS plans to lower the 1099-K threshold to $600 in the future—possibly as early as 2026, depending on final guidance. If this happens, even small transactions may trigger tax forms from these apps.
Bottom Line:
If you use Venmo, PayPal, or Cash App for your business, now is the time to prepare. Stay compliant by reporting income properly and keeping accurate records.
Need help staying compliant with digital payment reporting rules?
📩 If you need any assistance with your accounting, reach out today: info@x-accounting.com.