Your Venmo transactions may be taxable. Here’s what to know.

The lines may seem blurry when receiving funds via Venmo or other third-party payment apps, but you still may be subject to paying taxes on such transactions. Yahoo Finance’s Molly Moorhead joins Wealth! to discuss the tax implications for Venmo use.

Moorehead signals that some transactions do not constitute reportable taxable income: personal spending, whether receiving a birthday gift from a relative or splitting utilities with a roommate, is tax-free. However, your income must be reported on your taxes if you have a side gig or run a small business via Venmo or another app. Moorhead explains what tax form to expect and outlines the earnings threshold.

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Editor’s note: This article was written by Gabriel Roy.

Video Transcript

BRAD SMITH: The deadline for tax season fast approaching, but the devil is in the details as they say. If you’re a business using Venmo, or other third party payment apps, you may be subject to paying taxes on them. How can you know? Lets get to Yahoo Finance’s Molly Moorhead What do you have for us here Molly, a lot of people perhaps sitting on the edge of their ergonomic chairs on this one.

MOLLY MOORHEAD: Hi Brad. Yeah, so I can talk about personal transactions on Venmo and the tax implications there, business transactions on Venmo, and then just generally things to look out for and be aware of when you’re using these apps. And this applies not just to Venmo, but PayPal, Zelle, whatever third card– third party payment app you’re using.

So the first one, personal transactions, a lot of us do this on Venmo, I’m happy to report this is not reportable taxable income. This is things like you and your friend go out to dinner, you pay the bill, your friend Venmo’s you for her share. Your mom sends you 100 bucks on Venmo for your birthday, or you and your roommate, for your bills, you pay the light bill this month, your roommate Venmo’s you for their half to settle up. All of this is just gifts and exchanges between friends and family, it’s not taxable income, the IRS is not interested.

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BRAD SMITH: OK, so what about small businesses out there, Molly, that are trying to make sure that they’re running things by the books?

MOLLY MOORHEAD: Yeah, if you have a side gig, or you run a small business and you take money via Venmo or another app, this is income, it’s taxable, you got to report it on your income taxes every year. So think about somebody who does lawn care, or pet care business on the side and gets paid on Venmo. Somebody who makes and sells a product like original stationery or graphic t-shirts, whatever, those are things you’re doing for a profit, you’re earning money off it, and it goes on your income taxes.

BRAD SMITH: Now, generally, what are some things that users of these third party apps should be aware of as well?

MOLLY MOORHEAD: Well getting back to the personal versus business, every now and then take a look at those transactions when they come in, and make sure that something that’s personal is not tagged goods and services, because that could cause confusion at tax time, if it looks like something you got paid for in your business.

And then if you do run your business via Venmo, then you’re going to get a tax form called a 1099-K. And that will include all of these business transactions, that’s what you’re going to use to report these on your income taxes. In 2023, you’ll get a 1099-K if you had $20,000 or more of transactions on one of these apps, so it’s a pretty high threshold.

BRAD SMITH: Molly, thanks so much for laying out the threshold, as well as what a lot of people who have those side streams of income and side gigs might need to know, especially about some of those app payments. Thanks so much. Molly Moorhead.