Most people wonder if IRS taxes to transfer money to Zelle and Cash apps will be enforced. Continue reading to know the definitive answer to this concern.
With the advent of financial apps, people are worried they’ll get taxed over simple day-to-day transactions without their prior knowledge.
Now that the Internal Revenue Service (IRS) collects information about large transactions and whatnot, logically, that would be the next step to implement, right?
Fortunately, though, there’s no need to worry over this because no transfers on both of these apps are taxable. For Zelle, you won’t even get form 1099-K. As for Cash App, the form won’t be issued, provided you have a personal account. If you have a Cash for Business account, the form will show up.
Of course, a summary about taxes to transfer money to Zelle and Cash App won’t suffice, so let’s delve deeper into this topic!
Zelle Cash App Tax Law
There are no implemented taxes for any transactions of personal nature on both Zelle and Cash App. This is because the IRS only needs reporting for sales of goods or services that are done through financial apps.
This isn’t possible through Zelle, but you might see form 1099-K on Cash App if you have a Cash for Business account.
What Is Form 1099-K?
As you may already know, form 1099-K is used to report transactions of goods and services through peer-to-peer (P2P) services such as Cash App and Zelle. If your account has gross sales that are $600 or more by the end of the tax year, your activity will be reported to the IRS, which will tax you eventually.
Zelle doesn’t send out form 1099-K to users meeting the reporting thresholds on the Zelle Network. Therefore, it’s the user’s duty to calculate and report these transactions to the IRS by the end of the year. Consulting a tax professional, in this case, is ideal.
Note that the gross of sending and receiving money on Zelle for personal purposes (sending or receiving money from friends, family, etc.) isn’t taxable and won’t qualify for form 1099-K.
Similar to Zelle, the standard personal Cash App account won’t qualify for taxes even if the gross of personal transactions exceeds $600 by the end of the tax year.
However, unlike Zelle, Cash App does send form 1099-K when necessary, so expect to see this form when:
- You have a Cash for Business account
- You have $600 gross sales by the end of the tax year on your business account
Note that these forms are effective starting in 2022, so any payments made before this year won’t be reexamined or submitted through this form.
What to Expect on Form 1099-K
Since this is a new form, there are only a few speculations regarding the info that’ll be requested, but here’s some info that we surmise might be asked of you:
- Total gross income received within 2022 without discounts or refunds
- Credit cards payments
- Online payments
- Any sort of income for your business
- Individual Tax Identification Number (ITIN)
- Employer Identification Number (EIN)
- Social Security Number (SSN)
Are There Any New Taxes?
No. Form 1099-K doesn’t change anything in terms of applicable taxes, and neither Cash App nor Zelle will ask you to pay extra. This is only a means to ease the process of implementing the tax law.
What to Prepare for Your Tax Reporting on Cash App
While there’s no evidence that this report will include non-taxable transactions, it’s a good idea to keep track of your income. These are the things we highly recommend you keep a record of:
- Bank statements
- Business-related financial records
- Accounting records
- Payroll records
- Tax forms
With all of that said, you should be well prepared for form 1099-K! Make sure to have hard and soft copies of these forms to cover all your bases.
Despite the rising concerns regarding taxes to transfer money to Zelle and Cash App, these apps are still intact, and these changes shouldn’t worry you if you’re using these apps solely for personal purposes.
If not, make sure to take a look at the steps mentioned here so that you have proper tracking of your transactions, which will immensely help you keep this tax step easy and wrinkle-free.