PODCAST 83: Do I Need to Add Venmo Transactions to My Tax Returns?

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Below is a transcription of the Ask Gregory Podcast 83 – Do I Need to Add Venmo Transactions to My Tax Returns?

Gregory Ricks  00:00

Hey, welcome. I’m your host Gregory Rick’s a financial advisor here to answer your questions and help you win with your money.

Podcast Intro / Outro  00:09

On this episode of the Ask Gregory Podcast, Gregory is joined by Jude Heath, and together they’re going to tackle the question: Do I need to add my Venmo transactions to my tax returns? We also have a complimentary download waiting for you on this topic. If you go to gregoryricks.com/podcast83 Again, that is gregoryricks.com/podcast83.

Gregory Ricks  00:29

And I’ve got Jude Heath of J. Heath & Company CPAs. in studio with me, how are you? Bad? Great, great.

Jude Heath  00:37

We had a good tax season

Gregory Ricks  00:41

Means you were busy, very lots of people that needed to do tax returns Yes, through you, you are telling me you’re seeing an impact on the industry. So I want to share with that because, you know, we’re looking at capacity and businesses get on some side, some people are, you know, my business isn’t very busy. But we are actually in that most everybody were correlated to or know, regardless of the industry are pretty busy. And they need more employees, it is tough. And then we’re in this world of the big resignation. And that’s affecting everybody. And we’ve had some people leave just because they want to seek other opportunities is okay. And some of that is people kind of saying, you know, I just want to do my own thing I, you know, I want to drive Uber, or cut grass or clean windows or whatever it is out there. But one of the things we’re doing is apps like Venmo, and others enable them to get paid easily. And it might also it enables them to do it in a way they’re probably not keeping proper books. Yeah, you know, tax they passed, but there’s this thing called an extension, which you can put it off and and do it later. So do you still pick up clients, Colorado, hey, I’ve got to get this thing done.

Jude Heath  02:11

Absolutely. And the closer we get to the end of the year, you know, we’ve got new laws coming into effect. At the end of this year, a biggie is going to be the 10 99k from the online platforms like Venmo they were expecting a big influx of people that are going to require help with filing, because they they’re going to get this 1099 from the online platforms, and they just don’t know what to do with it.

Gregory Ricks  02:40

Wow. So that was done last year. Right? Okay, everybody can kind of wipe their forehead, I get the sweat off of that. So you’re okay. exchanging money through Venmo and other similar platforms? So let’s talk about that. Because I’m sure a lot of that’s done. It’s just like, yeah, pay me through that. So at the end of this year, Venmo is kicking out 1099 case, that’s right to everybody. Now, what does that look like? Does that have to be on certain size transactions? Tell us cuz, you know, there’s, that’s been a neat thing. And that’s, that’s part of this gig economy, where people can do business, and they don’t have to run it through a bank account. I’ve got lawn guy, and that’s how he wanted to get paid. We’ve had other people do things for us even hire a trainer for a period of time and, and she said, You know, I like payment through Venmo. So there’s a lot of people that are getting compensated that way. So then explain what that looks like from your view, the 1099k.

Jude Heath  03:52

So a 1099k is the exact same form that is used by credit card companies, to 1099 Enterprises for their revenue that they ran through the credit card machine. So it’s a revenue 1099 It begins a tax form. And what we’ve found over the years is, is that some people that use some of these online platforms to get paid, they don’t reconcile all that. And maybe someone’s left off of their filing, I think the IRS recognize that as well. And so now with this 1099

Gregory Ricks  04:27

What some revenue never shows up on the return.

Jude Heath  04:30


Gregory Ricks  04:31

Yeah, I didn’t mean to do that.

Jude Heath  04:33

So now what’s going to happen is two years later, if you don’t pick up your 1099, the IRS is going to match that and say, send them a notice, hey, you didn’t pick this pick up this 1099. That notice goes on answered that 1099 is going to be applied to the tax rate, and the taxpayer is going to get a tax bill on their revenue. So we’re encouraging our clients and not just our client’s because we think this is going to affect the taxpayer population. Some people that have been using some of the online platforms to file their taxes themselves, is reach out to the people that are using these online platforms and just remind them that there’s sort of a reckoning at the end of this year.

Gregory Ricks  05:18

So people are getting paid through that at the end of this year. Venmo. And other vendors like that are going to kick out a 1099k  to the IRS, which means they’re going to tell the IRS you’ve been making money through this. We don’t know the exact details, whether it’s if you make more than compensation from this one person that’s pay into your account. They note that over time, or is it all transactions going into your Venmo? You know, I don’t know how they separate that out. But what’s going to happen, and I know this is coming two years out, the IRS is getting a copy of it automatically. And you’re not accounting for it on your tax return. So there’s this thing the IRS does is when the book, the paperwork doesn’t match up, they’re basically going to say you didn’t tell us about this. So we’re adding this to your bill. And by the way, there’s penalties and late fees for not telling us and paying it two years ago, and that’s your notice. And you’ve got to respond to it in a certain period of time. And they’ll get a little meaner with each letter. So that’s kind of how that works. So I know somebody that kind of does this, where somebody sends money, and some of them they can share who’s seen it and they’ll say, Well, yeah, it’s for dance lessons. It’s for pizza. You know, it’s for beer drinking, and just whatever. But this is kind of more serious. Now. So what should somebody be doing in light of what you knows coming?

Jude Heath  06:55

So what I find with people that use the online platforms, they’ll get paid by somebody, let’s let’s just take the dance instructor that you talked about, that’s a viable enterprise. She gets paid or he gets paid for dance lessons, she gets paid $300 for a series of dance lessons, she takes $200 out because she needs to pay your light bill that month. So the money they’re taken out of those online platforms, mostly is personal money. So then when they come in with their tax records, and I say, Well, before we do your taxes, check your Venmo and just see if they’ve given see if they posted a 1099 on your account. Oh my goodness, that posted a 1099 for $8,000. Okay, that’s your revenue. Let’s see what business expenses we can use to offset that. business expenses. I don’t have any Can I use my mileage, my dancin shoes, or what? What can I use, and so we have to go through a list, then we these are the viable expenses, it clearly will not be enough to offset revenue. And so she’s gonna have a tax bill taxed twice, FICA rate 15.3%. And also at the individual income tax rate, the combined progressive rate, it’s going to be a big rate, and she’s going to probably owe that year. And so it’s going to change the conversation, a lot of the gig economy.

Gregory Ricks  08:24

Gosh, this is going to be done for this year, and you’re doing business on Venmo. IRS wants to know about your game, why yo some taxes there if you’re getting money, and here I just opened my Venmo it says if you sell $600 or more in a calendar year, we’ll share this info with the IRS and issue you a form 10 99k. So it has my name and then it’s blank where it says social security number. Below it it says the IRS requires us to ask for your full social security or tax ID number. We’ll keep it private. Well, I would hope so keep it private, except they’re not going to keep it private from the IRS. And then it’s got a thing and click on what’s form 10 99k. And I asked the dude, I said, Well, what if I don’t fill that in the social security number? He said, they’re probably going to block me out of the account there because they’re required, probably to have that. And if somebody’s new downloading the app, I would guess that’s part of signing up for that app as you got to put your tax ID out there. But say you’re a sole proprietor, meaning you’re not an entity that’s incorporated and there’s an option to have a business Venmo account. But if you got these things going on where somebody’s paying you for the back for the pizza, and for the beer last night out with the friends or you bought fuel for their jetski and they’re paying you back all these different reasons. See this I’m getting over the personal stuff. But if you’re doing that, and also, you know, I pressure wash this guy’s house down the street, and he gave me $700. So if we were mixing that you’ve got to separate that out, because that’s just like in your bank account. There. Where’s the profit? The IRS is looking for it. And that’s going to be interesting to see how this shakes out. But you should start some bookkeeping. On on these gig jobs. They’re in like Uber and Lyft. And other those are probably issuing 1090 nines as well, which pretty much means that’s all for business. Your thoughts?

Jude Heath  10:36

Yeah, absolutely. We think that that’s going to expand number of small businesses in the country, we think it’s going to really increase the number of folks that cannot file their own taxes at least for a few years. And maybe down the road that they’ll get a handle on it, but it’s going to take our industry some effort to help these folks become compliant.

Podcast Intro / Outro  11:01

Thanks, everyone, for tuning into this week’s episode of the Ask Gregory Podcast. We’d like to give a big thank you to our guests Jude Heath for joining us on this episode. And don’t forget we’ve got a complimentary download waiting for you on this topic. If you go to gregoryricks.com/podcast83. Again, that is gregoryricks.com/podcast83.

Gregory Ricks  11:21

Thanks so much for listening to ask Gregory where we answer your financial questions. You can find us anywhere Podcasts can be found and on YouTube and Facebook Live every Saturday from 10 to 1. If you love this podcast, subscribe, leave a review and tune in next time.

Podcast Intro / Outro  11:40

Gregory Ricks & Associates is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Gregory Ricks & Associates are not affiliated companies. Gregory Ricks & Associates, The Total Wealth Authority is our trademarked tagline, it does not promise or guarantee investment results or preservation of principal nor does it represent a certain level of skill. Investing involves risk, including the potential loss of principal. Any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Gregory Ricks & Associates is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Gregory Ricks & Associates. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Gregory Ricks & Associates is stated or implied Gregory Ricks & Associates has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. AEWM, Gregory Ricks & Associates, WJ Blanchard Law, LLC, J Heath & Co. and Mortgage Gumbo are not affiliated companies. This show is a paid placement.