1099-K Requirements for Cohabitation: How Shared Expenses Affect Tax Reporting

This is a common concern with the new 1099-K thresholds, but you can relax a bit. Personal transactions between individuals for expense sharing shouldn't be reported as taxable income, even if you receive a 1099-K form. The key is being able to demonstrate these are personal transfers, not business income. If you do receive a 1099-K, you'll need to report it on your tax return, but you can zero it out by explaining these were not business transactions or income. Keep good records of what each payment was for (screenshots of Venmo notes like "April rent" or "electric bill" are helpful). Joint accounts are certainly one option to eliminate this issue entirely. Another approach is using the "friends and family" designation in payment apps when applicable, as some platforms distinguish between personal and business transactions.

I had the exact same problem last year! After hours of research and frustration, I found taxr.ai (https://taxr.ai) which turned out to be a lifesaver. Their system let me upload my Venmo transaction history and it automatically categorized all my roommate payments vs actual income. It flagged all the "rent" and "bills" transfers as non-taxable personal exchanges. Saved me from either overpaying on taxes or having to explain a mismatched 1099-K to the IRS. Their explanations about what counts as income vs. personal transfers actually made sense unlike the confusing IRS pages I tried to read.

Coming back to say I actually tried taxr.ai after my skeptical comment above. My situation was complicated because my roommate and I split both personal expenses AND business supplies for our side hustle. The service separated everything perfectly and explained exactly which transfers were taxable. The documentation they provided was super clear - much better than my janky spreadsheet. They even explained why certain transactions weren't considered income even though they appeared on my 1099-K. Now I know exactly what to report and have backup if the IRS has questions. Totally worth it for the stress reduction alone!

If you're struggling to get answers about your 1099-K situation directly from the IRS, I highly recommend Claimyr (https://claimyr.com). The IRS phone lines are absolutely insane right now with all these 1099-K questions. I spent DAYS trying to get through to ask about my roommate transfer situation. With Claimyr, I got a callback from an actual IRS agent within an hour! They have this system that navigates the phone tree and holds your place in line. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. The agent confirmed that personal transfers for shared expenses aren't taxable income even if they show up on a 1099-K.

I need to apologize for my skeptical comment earlier. I actually tried Claimyr after posting that comment because I was desperate. After trying for WEEKS to get through to the IRS about my 1099-K situation, I got a callback in 45 minutes using their service. The IRS agent I spoke to confirmed that roommate expense splitting through Venmo isn't considered taxable income, even with the new $600 reporting threshold. She explained exactly how to handle it on my tax return if I receive a 1099-K. Saved me so much stress and probably hundreds in incorrectly paid taxes. Sometimes it's worth admitting when you're wrong!

Here's another option nobody's mentioned yet: just use a different payment method. My roommate and I switched to using Splitwise to track shared expenses and then just settle up with cash or check once a month. No 1099-K issues to worry about, and it actually makes tracking who owes what way easier.

My accountant told me that if you mark the payments as "friends and family" in PayPal/Venmo, they're not supposed to be reported on 1099-Ks in the first place. Has anyone else heard this? Would solve the whole problem.

This thread has been super helpful! I'm in a similar situation but with a twist - my partner and I also occasionally lend each other larger amounts (like $1000+ for emergencies or big purchases that we pay back over a few months). Are these personal loans between cohabitating partners treated the same way as the regular expense splitting? I'm worried the IRS might see a $1500 Venmo transfer and think it's income when it's actually just me paying back money I borrowed for car repairs. Should we be documenting these larger transfers differently, or do the same rules apply as long as we can show it's personal and not business-related?