The Taxpayer Advocate Service has published an article titled “TAS Tax Tip: Use caution when paying or receiving payments from friends or family members using cash payment apps”. The article begins as follows:
Here’s something important to pay attention to this year if you use certain cash applications to send or receive money from others for something other than business transactions.
After a night out with friends, some of whom didn’t come with cash, the group decides that one person pays, and the rest will send their share of the meal (plus tip!) on Venmo or another type of cash payment application. Or after a day shopping with your older child and you pay for that pair of pants, but your child is responsible for paying you back later using a cash app.
These situations should be no big deal, right?
Not necessarily. Be careful, because how that payment is classified could cause you or them to receive a Form 1099-K, Payment Card and Third Party Network Transactions. Form 1099-K is an information return and is provided to the IRS and to you.
To view the full article, click: “TAS Tax Tip: Use caution when paying or receiving payments from friends or family members using cash payment apps”.
Posted by Jessica Ji, Associate Editor, Wealth Strategies Journal.