The IRS has started tracking anyone who uses P2P payment applications.
If you use Cash App for commercial transactions, you may be required to pay taxes.
Many Cash App users are unsure how to submit 1099-K Cash App reporting or a 1099-NEC form with Cash App Taxes.
Here’s everything you need to know about reporting 1099-K Cash App income and using Cash App Taxes.
What is Form 1099-K?
A 1099-K is a record of a transaction from a third-party payment network, such as Cash App, Venmo, or PayPal.
Individuals must complete it for 1099-K Cash App transactions and send copies to the IRS.
The 1099-K must also be sent to the state and the individual receiving the money.
This new tax legislation went into effect in 2022 as part of Joe Biden’s American Rescue Plan.
The new tax law applies to tax returns filed in 2023 for the fiscal year 2022.
NOTICE: If you earned at least $600 from online transactions during the year, you are obligated to file and issue a 1099-K.
The $600 Requirement is an Aggregate
This means that if you receive small sums of money through Cash App in 2022, you’ll receive a 1099-K Cash App form if those payments total at least $600.
NOTICE: A 1099-K Cash App form is not the same as a W-2, which records employee earnings.
What is the Purpose of a 1099-K?
A 1099-K is an information return that can be used to compute other items on your tax return.
In particular, a 1099-K can assist you in determining how much revenue you made through P2P apps, like Cash App.
Who Are Eligible for the 1099-K Cash App?
Cash for Business accounts with $600 or more in total sales during the 2022 tax year will receive a Form 1099-K Cash App form.
It must be reported to the IRS via Cash App beginning January 1, 2022.
Personal Cash App accounts are exempt from the new $600 reporting requirement.
Instead, it only applies to Cash for Business accounts and payments received in 2022.
Check Your State Laws
In the United States, your eligibility for a Form 1099-K is determined by the state where your taxpayer information is tied.
Accounts that fulfill both of the following conditions in most states are required to disclose a Form 1099-K to the IRS:
- More than $20,000 in sales of goods or services during the year
- More than 200 transactions in a year
NOTE: In some states, the maximum exceeds $600.
Where Can I Get Form 1099-K?
If you meet the requirements, you may obtain your Form(s) 1099-K from the Tax Forms area of your Cash App Website Dashboard.
What Are Taxable Transactions On Cash App?
Income on Cash App is defined as money received in exchange for a service or items sold and must be documented.
Money collected via cash App might represent a wide range of services.
For example, if you earn money using ridesharing services, the money must be declared and deemed as taxable income.
Other examples of when you must also report revenue on your tax return could be if you clean houses or babysit as a side job.
REMEMBER: you must file if you earn more than $600 from any single party or more than $600 in cumulative payments.
The same is true for someone who makes money selling products online and receives payments using Cash App.
Read our related article, Can You Get Tax Refund On Cash App? Here’s what you need to know about refunds!
How Do I File a 1099-K Cash App Form?
Cash App Taxes makes filing your tax return simple and free.
They even have a specialized support crew to deal with any issues.
Follow these steps to get started with Cash App Taxes.
Enter Personal Information First
- Log into the Cash App banking page and look for the “Cash App Taxes” option.
- If you work as an independent contractor, such as a ride-sharing driver, obtain a 1099-NEC or a 1099-K from firms that paid $600 or more throughout the year.
- If your employer did not provide a 1099, you might have to rely on your records to calculate your total self-employment income for the tax year.
- Gather your company expenses now. The IRS defines your company expenses as “the cost of carrying on a trade or business.”
- The cost must be typical and required for that business or service.
- Enter personal information in the Basic Info area (name, Social Security number, date of birth, address, and information about your spouse and dependents).
Input Income from W-2s and 1099 Forms
- After that, input any W-2s you have. If this section does not apply to you, skip it.
- Then, enter your self-employed income for the current tax year under the Self-employed income card area.
- Enter your earnings. You will need to enter each 1099 form individually if you have more than one.
- Enter your business name or pick a business name from your return on the following screen.
- To enter the Business income (Schedule C) section, click the Start button and choose Edit for the name of the business on your 1099-NEC item.
- Input any business revenue that was not reported on your 1099-NECs (the income you entered from your 1099-NEC(s) will be auto-populated).
- Enter the amount(s) from Box 1 under “Merchant card and third-party network payments” if you got a 1099-K.
- Enter any extra revenue from this business that was not reported on a 1099-NEC or a 1099-K under “Gross Receipts or Sales.”
Follow the on-screen instructions to complete the whole tax reporting process.
How to Do Tax Reporting With Cash for Business (B Notices)
You will get a First B Notice if the TIN and name you gave Cash App do not match what the IRS has on file.
You must send Square a Form W-9 electronically by the deadline given in the letter.
Fill out the form at cash.app/tax-information.
If Square doesn’t get a signed Form W-9 by the due date, your Cash App account will be turned into a personal account and turned off.
4 Things to Consider When Reporting 1099-K Income On Taxes
1. Does Not Apply to 2021 Taxes
These new rules do not apply to the 2021 taxes you submitted in 2022. Instead, it pertains to taxes for 2022, which you will file in the spring of 2023.
2. Do Not Disclose Your Revenue Twice
You should ensure that you do not disclose your revenue twice to the IRS.
For example, if you completed an $800 freelancing gig for a customer, you’ll need to submit that revenue as income on your tax return.
But, you’ll have two pieces of documentation proving it.
First, the customer will likely issue you a 1099-NEC at the end of the year, indicating that it paid you $800.
However, what if the customer transfers the money via Cash App, Venmo, or another comparable platform?
You may also receive a 1099-K from the payment network for the same $800.
As a result, you’ll need to keep solid accounting records to avoid over- or under-reporting your firm income.
3. You May Not Owe Taxes
Receiving a 1099-K doesn’t always imply that you owe taxes on the money.
That is, not all of the transactions on your 1099-K are likely to be business-related.
You may also be eligible for tax deductions that might offset part of your company revenue.
So, if you cut hair and make $500, but you paid for combs, scissors, and hair products, you can deduct those expenses from your $500.
4. Record Company Revenue On Taxes
You must record company revenue on your taxes. The new reporting obligation only applies to sellers of goods and services.
That means it does not apply to personal payments, such as when someone pays you back for dinner.
For example, if you are a sole owner, you will almost certainly need to file a Schedule C with your tax return to calculate and report your company revenue.
You can use the 1099-Ks you receive to assist you in figuring out how much money you received from clients.
This includes money received via Cash App, Venmo, PayPal, or other comparable payment methods.
What Can I Do to Calculate Taxes On Cash App Transactions?
As previously mentioned, this new reporting obligation only applies if someone uses a peer-to-peer payment network to acquire or sell goods and services.
You have to be meticulous if you are getting paid on Cash App for a side hustle or receiving both personal and business payments.
You can take these steps to make this accounting easier:
- First, download and print the transaction history from Cash App.
- After downloading your transactions, sort them into business and personal categories.
- Gather your invoices and receipts to indicate which transactions were income and which were not.
- It’s important to note that displaying a bank or credit card statement to the IRS does not constitute a receipt.
- If you got money as a gift, you might need to clarify your connection with the person who gave you the gift.
- The annual gift-tax exemption for 2021 is $15,000 per receiver, so you don’t have to pay taxes on gifts of $15,000 or less.
- You are not usually liable to gift tax if you are the recipient.
Do I Have to Pay New Taxes for Using Cash App?
The new guidelines ensure that money your business generates using Cash App is submitted to the IRS.
To be clear, this new rule does not impose a new tax. You have been required to declare income over $600 for decades.
Only the reporting requirements for Form 1099-K have changed due to the new law, and the IRS will now be alerted of your Cash App income.
Does Cash App Revenue Need to Be Reported to IRS?
The IRS wants to know how much you use Cash App, Zelle, and other third-party apps for business transactions.
These money-transferring apps must report to the IRS if you receive more than $600 yearly for business purposes.
You’ll get a 1099-K Cash App form and either pay taxes on business expenses or claim it is personal.
How Do I Avoid Getting a 1099 On Cash App?
You can avoid this requirement if you have a Cash App personal account and send or receive money for meals, presents, or from family or friends.
Personal accounts are exempt from the new reporting requirements and will not get a Form 1099-K Cash App form.
If you handle the payment as a “family and friends” transaction, they will not be taxed on those monies.
You may also use Cash App to avoid mistakenly registering a transaction as a business purchase.
What is the Cash App 1099 Trigger Amount?
The American Rescue Plan Act of 2021 has triggered these new requirements.
As of January 1, 2022, services like Cash App will have to report payments for goods and services on Form 1099-K if they add up to $600 or more in a year.
Cash App will have to send users Form 1099-K for mail or online transactions worth more than $600, which is the Cash App Trigger amount for the 1099-K form.
This short video explains how the American Rescue Plan Act has changed the world of “gig workers”:
What is Cash App 1099-B?
A 1099-B form contains information regarding stocks or property in a broker-handled transaction.
Form 1099-B Cash App users will get a Form 1099-B based on the information they put on their Form W-9.
If a user sold stocks or Bitcoin during the reported tax year, Cash App would send them a 1099-B form by February 15 of the following year.
Why Can’t I See a Form 1099-K for the Current Tax Year?
If Cash App didn’t send you a Form 1099-K, you could use your online Dashboard to figure out your annual sales report and look at your fees.
You can also send reports and sales information to your accountant or a tax expert.