Venmo Taxes: How They Work and IRS Rules

Venmo’s simplicity makes it easy to use for nearly any type of transaction. As digital payments have grown in popularity, the IRS has increased its attention on how money moves through platforms like Venmo. If you receive payments on Venmo for goods or services, those transactions may create tax obligations that are easy to overlook.

This guide explains when Venmo payments count as taxable income, when Venmo issues IRS Form 1099-K, and what you must report even if you never receive a tax form. Whether you run a business, manage a side hustle, or occasionally sell items, understanding these rules helps you stay compliant and avoid costly mistakes.

Key Highlights

• Personal transfers such as reimbursements, gifts, and shared bills are not taxable.

• Payments for goods and services are taxable income and must be reported to the IRS.

• Venmo issues a 1099-K only when specific income and transaction thresholds are met.

• You must still report taxable income even if you never receive a 1099-K.

• Changing IRS rules make it important to track your own records throughout the year.

• Strong documentation and clear payment labeling help you avoid IRS mismatches.

• Freelancers and small businesses often benefit from professional bookkeeping and tax support.

How the IRS Treats Venmo Transactions: Taxable vs. Personal Payments

Personal transfers

Most Venmo users rely on the app for everyday personal transactions. These include:

• Splitting dinner

• Paying rent to a roommate

• Sending gifts

• Reimbursing a friend

Are peer-to-peer payments taxable? These payments are not considered taxable income and are not subject to Form 1099-K reporting. IRS guidance states that only transactions involving goods or services are subject to income reporting requirements.

Because personal transfers do not reflect business activity, Venmo does not treat them as taxable, and they are not included in year-end summaries for income reporting.

Payments for goods or services

If you use Venmo to receive payment for work or items sold, those payments count as taxable income. This includes freelance work, online sales, local resale, gig work, and any business activities. Venmo is simply a platform for moving money. The IRS taxes the underlying activity, not the app.

Examples of taxable Venmo payments include:

• Graphic design, writing, tutoring, and other freelance services.

• Product resale or handmade craft sales.

• Any payment marked or described as “goods and services.”

• Side hustle or gig work compensation.

Even if a customer pays you through Venmo instead of a traditional business system, you are still required to report the income. Venmo business income reporting is essential for maintaining compliance. 

How 1099-K Works for Venmo: Reporting Rules and Recent Changes

What is a 1099-K, and who issues it

Form 1099-K is issued for third-party network transactions by third-party payment platforms such as Venmo when you meet or exceed specific payment thresholds for goods and services. The form reports your gross payment volume. It does not reflect expenses or deductions. Venmo sends the form to both you and the IRS, giving the IRS visibility into your business activity.

Recent threshold changes (2024–2026)

1099-K rules have changed frequently in recent years, creating confusion for taxpayers.

• 2024 tax year: A 1099-K was required when more than $5,000 was received for goods and services.

• 2025 tax year: Some sources indicate the threshold may drop to $2,500, though this is not yet consistent across guidance. A professional can help you understand Venmo tax rules 2025. 

• A planned drop to $600 has been postponed multiple times.

• As of late 2025, many platforms appear to be using the long-standing threshold of 200 or more transactions AND more than $20,000 in payments.

Because thresholds have shifted multiple times, business owners should rely on their own financial records rather than waiting for a tax form to be issued.

What a 1099-K means, and what it doesn’t guarantee

Receiving a 1099-K means the IRS has been informed of your gross payments. It does not mean you owe tax on the full amount. You still calculate taxable income by subtracting allowable expenses, cost basis, and deductions on your Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), or other applicable form.

Even if you do not receive a 1099-K, you are still required to report all taxable income. The IRS Form 1099-K reporting requirements clearly state that income from goods or services must be reported, regardless of whether a Form 1099-K is issued.

Tracking business expenses, including cost basis for resale and deductions, is important, especially for small business owners and freelancers.

Common Scenarios for Venmo Taxes

Selling goods online or locally

Selling items for profit on Venmo counts as taxable income. This includes sales made through online marketplaces, local pickup groups, or your own business channels.

Tracking cost basis is essential, and you only owe tax on the gain. For example:

• You buy materials or inventory for $300.

• You sell the finished product for $550.

• Your taxable income is $250.

If you sell a personal item for less than you originally paid for it, such as used furniture or equipment, the sale is not taxable.

Providing services (freelance work, side hustles, gig work)

If you receive Venmo payments for any form of service work, it counts as business income. Freelancers typically report this on Schedule C, and depending on your income level, you may need to make quarterly estimated tax payments.

The platform used to collect your income does not change your tax obligations. Venmo, PayPal, bank transfer, and even Cash App all follow the same reporting rules. This makes accurate records for Venmo and PayPal users, as well as other payment platforms, critical.

Mixed-use scenarios

Many payment app users mix personal and business payments in the same account. While Venmo allows this, it can create confusion at tax time.

Best practices include:

• Label business payments clearly

• Use Venmo’s goods and services designation when applicable

• Separate personal descriptions from business-related notes

• Keep digital receipts, invoices, and transaction notes

• Maintain a separate bank account for business income and transfers

Clear separation reduces the risk of including personal transactions in your gross income totals and makes your year-end bookkeeping smoother.

What You Should Do When Tax Time Comes

Collect bank records, receipts, cost basis, and expense records

Well-organized records are essential for accurate tax reporting. You should gather:

• Venmo payment histories

• Bank statements showing transfers

• Receipts for supplies or inventory

• Invoices for services provided

• Notes on cost basis for resold items

Recordkeeping helps ensure you pay tax only on your actual profits, not on your gross receipts.

Reporting income even if no 1099-K arrives

A Venmo 1099-K is not the deciding factor in whether income is taxable. You must report all business income regardless of whether Venmo issues a form.

Sole proprietors typically report business income and expenses on Schedule C. If your business is set up as an LLC or corporation, your reporting obligations may differ.

When to consider professional help

If your income comes from multiple platforms or your bookkeeping has grown complex, professional help can give you peace of mind.

1-800Accountant, America's leading virtual accounting firm, offers comprehensive income tax services that support small business owners, freelancers, and entrepreneurs. A dedicated accountant or team can help you:

• Categorize Venmo income correctly

• Track deductible business expenses

• Prepare compliant and accurate tax filings

• Plan ahead for quarterly estimated taxes

Having affordable, tax-deductible support can reduce your stress and help you avoid costly errors throughout the tax year.

Key Takeaways and Tips for Staying Compliant

Remember, when it comes to business and personal payments, business transactions are taxable, while personal transfers, including gifts and reimbursements, are not. Well-organized records are essential for accurate business tax reporting. Separate business accounts and personal accounts are essential, and gather pertinent records, such as receipts for supplies or invoices for services provided. Detailed records and tax documents help ensure efficient tax preparation before you file taxes.

It's always better to over-document business performance throughout the year. Under-documenting can lead to IRS mismatches and costly penalties, disrupting your operations. 

Frequently Asked Questions (FAQ)

Do I owe taxes if I only sell a few items on Venmo occasionally?

If you sell personal items at a loss, you do not owe tax. If you sell items for more than you paid for them, you must report the gain on your income tax return.

What if I sold items at a loss?

Selling personal property for less than you originally paid is not taxable, and the loss is not deductible. Still, keep records to support the transaction.

Will I always get a 1099-K? What if I don't?

No, you won't always receive this form. The reporting thresholds change often, and many casual sellers will not receive a 1099-K. However, you must still report taxable income.

What counts as business income vs. personal payment?

Business income includes payments for services or items sold. Personal payments include gifts, reimbursements, and shared expenses. Clear labeling helps distinguish between the two and helps you pay applicable taxes. The tax implications of mislabeling income and payments received can be difficult to overcome.