Do I have to report income from SNAP benefits, Venmo, or Zelle transfers on taxes?

Wait I'm confused about the Venmo thing. I thought the IRS made a new rule that payment apps have to report everything over $600 now? I got a notice from PayPal about this. Does that mean I'll get a tax form for money my mom sends me?

The reporting requirement you're thinking about applies to payment apps like Venmo and PayPal, but it only affects payments marked as "goods and services" - not personal transfers. When payment apps send 1099-K forms, they're only reporting business transactions where someone selected the goods/services option (which typically charges a fee). If your mom is just sending you money as a gift using the friends and family option (with no fee), that's not considered taxable income and won't generate a 1099-K form. The payment apps can tell the difference between personal transfers and business payments based on how they're categorized when sent. The $600 threshold is specifically for business transactions, not for personal gifts or family support.

Does it work for other payment apps too? I use Cash App mostly but sometimes Venmo. And can it tell you about state taxes too or just federal?

I'm kinda skeptical about tax tools since I got burned using one last year. How does it actually know the difference between gifts and income? Like what if I sometimes sell stuff to friends through Venmo but also get gifts? Can it really tell the difference?

It definitely works for all the major payment apps including Cash App, Venmo, Zelle, and PayPal. It covers the same rules for all of them since the IRS treats these platforms similarly. As for state taxes, yes it handles both federal and state tax questions and points out any differences in how states treat certain types of income. For distinguishing between gifts and income, it asks you detailed questions about the nature of the transactions - who sent the money, what it was for, frequency, relationship to the sender, etc. It can help separate occasional sales from gifts by looking at the patterns and purposes of the payments. The system is designed to identify which transactions fall under gift tax exclusions versus which ones might be considered income.

How does this actually work? I thought it was impossible to get through to the IRS. Is this just paying someone to wait on hold for you?

Yeah right, 15 minutes to reach the IRS? I've been trying for WEEKS and can't get through. Sounds too good to be true. How much does this cost anyway?

It's pretty straightforward - they use a system that navigates the IRS phone tree and waits on hold for you. When they get an IRS agent on the line, you get a call back and are connected directly with the agent. It saves you from having to stay on hold for hours or repeatedly calling just to get disconnected. No, it's not too good to be true - I was skeptical too! The system works because they're efficient at navigating the IRS phone system and can handle multiple calls simultaneously. They know exactly which options to select to reach the right department. I don't want to focus on the cost because the value of actually getting your tax questions answered directly from the IRS is what matters most.

Thank you for mentioning that! My parents and sister definitely don't send anywhere near that amount ($17,000), so it sounds like none of us need to worry about reporting these transfers. It's just small amounts to help with the kids. Do you know if there's any way the IRS might get confused if they see these Venmo transfers? Like should I keep records of what they were for just in case?

The IRS generally doesn't have visibility into personal Venmo/Zelle transfers unless they're marked as goods/services. These apps only report to the IRS when transactions are specifically tagged as business-related. It's still a good practice to keep basic records of larger gifts, especially recurring ones. Nothing fancy needed - just a simple note in your files that says "Monthly gift from sister for kids' school expenses" or "Birthday gift from parents." If you ever did face questions (which is unlikely), having this basic documentation would make it easy to explain the nature of these transfers.

Absolutely! I was going to say the same thing. With $24,000 income and two kids, you should definitely qualify for both credits. The Child Tax Credit is worth up to $2,000 per child, and the EITC could be worth several thousand more depending on your exact income. These are refundable credits too, which means you can get them even if you don't owe any taxes.

This is exactly what I needed to hear! As another single parent just starting to figure out taxes, it's so helpful to see someone who's been through this before. I had no idea about the Child and Dependent Care Credit - I do pay for after-school care while I'm at work, so that could be another credit I'm missing out on. Quick question - do you know if there's a limit on how much you can claim for the Child and Dependent Care Credit? I spend about $150 a month on after-school care for both kids. Also, when you say "claim both kids as dependents," is there anything special I need to do besides just putting their information on the tax form? Thanks for mentioning all these credits - I had only heard about the Child Tax Credit before but not the EITC or the childcare one. This could really make a difference for our family!

For the Child and Dependent Care Credit, you can claim up to $3,000 per child under 13 (or $6,000 total for two kids) in qualifying expenses. Your $150/month ($1,800/year) would definitely qualify! The credit is a percentage of your expenses based on your income - with your income level, you'd likely get 20-35% of your qualifying expenses back as a credit. As for claiming your kids as dependents, you just need to provide their Social Security numbers, full names, dates of birth, and indicate your relationship to them on your tax return. As long as they lived with you for more than half the year and you provided more than half their support, you should be good to go. The IRS forms will walk you through it step by step. One more tip - keep receipts for your childcare expenses! You'll need the provider's name, address, and tax ID number when you file. Most childcare providers will give you a summary at the end of the year that has everything you need. These credits can really add up and make a huge difference for families like ours!

This is such helpful advice! I love the idea of adding notes to Venmo transactions - that's so smart and something I never thought of. I've been worried about keeping track of everything but that makes it really simple. Can I ask what IRS online tool you use to estimate the credits? I want to get an idea of what to expect before I file. With everything everyone's shared here, it sounds like I might actually get a decent refund instead of owing money, which would be amazing for our family budget. It's so reassuring to hear from other single parents who've navigated this successfully. I was really stressing about potentially getting in trouble with the IRS, but now I feel much more confident about filing. Thanks for sharing your experience!