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With the increased use of mobile payment applications, the convenience of Venmo and other payment-to-payment methods like Zelle, Chase QuickPay, and Cash App are utilized by both large and small businesses, to make and receive payments for services and/or products.

What is Venmo?

Venmo is a mobile payment service application that allows you to send money from your phone to the recipient in a matter of seconds.With such efficiency and convenience, there’s no doubt that 10 million transactions are executed between peer-to-peer networks for both personal and business purposes. Originally owned by PayPal, the application essentially acts as a digital wallet, allowing you to link bank accounts, debit, and credit cards. 

From there, one can seamlessly transfer and receive payments effortlessly at their fingertips. Additionally, the service provides an option for users to create an ID to find friends and family members easily on the application by phone number or email address. While most often tend to use this application for personal use, Venmo has started to increase in popularity for business transactions. Do you lack cash to make a purchase? Simply use Venmo and the payment process will take from 1-3 business days without a transaction fee. Your days of running to the ATM are long gone, with this fast and efficient payment method. 

How does Venmo track transactions?

Venmo doesn’t specify what exactly the transaction was sent for. It will only show the text that was typed before sending or receiving the payment. Recently, the application notifies users with a Venmo statement through emails, yet it isn’t as detailed as a credit card or account statement from your bank. 

Using Venmo for business

Venmo associates with businesses in certain ways. For instance, Venmo would appear in large corporations, such as Uber, as a payment option. The application has a business account option on their website, with the aim of tracking purchases and giving businesses a platform for their entity. In addition, Venmo offers their own MasterCard where the firm mentions that users will earn rewards but also making it easier to track user’s purchases. 

Tax implications of using Venmo

If you’re using Venmo for business purposes, here are some tax considerations to keep in mind. 

Reporting income. It is extremely important to report your earnings, especially when you accept business payments on a peer-to-peer platform, such as Venmo and PayPal. These platforms are required to report to the IRS about clients who receive payments for the sale of goods and services through these applications. However, the threshold for reporting these transactions is high. Venmo must report gross payments received for sellers who receive over $20,000 in gross payment volume and over 200 separate payments in a calendar year. If you exceed the threshold, Venmo will send Form 1099-K to you and the IRS for that year early in the upcoming year. Even if you didn’t receive the form, you are still required to report any taxable income you receive through the application on your income tax return. 
Due diligence. If you usually receive your business income through Venmo, it is preferable to open a business account. Otherwise, your personal and business transactions will mix, making it more difficult to distinguish between business and personal payments. Make sure to keep a record of all income received from all sources during the year for accurate tax reporting. Whether you receive a 1099 or not, you must report your income on your tax return. Tracking it outside of Venmo will guarantee that you have the necessary data to report all of your income on the right forms.

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