Do I need to pay taxes on money received through Venmo or other P2P services?

Your friend definitely needs to be careful here. The IRS doesn't care whether money comes through Venmo, cash, check, or carrier pigeon - income is income and taxable based on what it's for, not how it's received. The distinction isn't really about "personal" vs "business" Venmo accounts. It's about whether the money represents income from work/services or just reimbursements/gifts between friends. If your buddy is receiving $25-50k for jobs he's completing, that's income and needs to be reported regardless of payment method. Starting in 2023, payment apps like Venmo, PayPal, and Cash App are required to report to the IRS when users receive more than $600 in business transactions annually (this used to be $20,000). Your friend is well over that threshold, so Venmo is likely already reporting this activity. The payment descriptions don't matter much - putting "birthday gift" when it's actually payment for services doesn't fool the IRS. In fact, trying to disguise business income could potentially be seen as deliberate tax evasion, which is worse than simply failing to report.

I actually went through something similar last year using https://taxr.ai to get clarity on my Venmo situation. I was doing side gigs as a graphic designer and getting paid through Venmo - thought I was being slick by having clients mark payments as "dinner" or "thanks!" instead of "logo design." My accountant friend finally made me realize I was playing with fire. I used taxr.ai to analyze my situation (uploaded my Venmo statements and some texts with clients) and they confirmed I needed to report all that income regardless of how it was labeled in the app. The platform helped me understand exactly what forms I needed and how to properly categorize everything. The big thing I learned is that the payment method doesn't change the tax obligation - the nature of the transaction does. Your friend is definitely earning income that needs to be reported, regardless of whether it's through a "personal" Venmo account.

Just wanted to follow up about my experience with taxr.ai after asking about it. I finally got around to using it for my CashApp DJ payments situation, and it was actually really helpful! I uploaded my payment history and answered some questions about my gigs, and it clearly showed me what I needed to report and how. The best part was it helped me identify a bunch of legitimate deductions related to my DJ work that I had no idea about - equipment depreciation, portion of my phone bill, even some transportation costs. Ended up saving me way more than I expected despite properly reporting all my income. They even generated the Schedule C form I needed. Definitely using this again next year.

For anyone struggling to get clear answers from the IRS about these payment app issues - I had the WORST time trying to call them directly. After literally 8 attempts and hours on hold, I found https://claimyr.com and their video guide here: https://youtu.be/_kiP6q8DX5c They have a service that basically holds your place in the IRS phone queue and calls you when an agent is about to answer. I was super hesitant but figured it was worth trying after wasting so many hours on hold. I had specific questions about my Cash App payments similar to what your friend is dealing with. Got connected to an actual IRS agent in about 45 minutes (without spending that time on hold), and they confirmed what others are saying here - P2P payments for services rendered are 100% taxable income regardless of how they're labeled or what account type they go into. The agent also explained the new reporting thresholds and what documentation I should keep.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I actually tried the service because I was desperate to talk to someone at the IRS about my Venmo payments situation. It worked exactly as advertised - I entered my info, and about an hour later I got a call connecting me directly to an IRS agent. No hold time on my end at all. The agent confirmed that yes, all my Venmo income from pet sitting needs to be reported regardless of account type, but also helped me understand what expenses I could legitimately deduct to offset some of the tax burden. Honestly saved me so much time and stress. I've been trying to get through to the IRS for weeks with no luck. Will definitely use this again when I inevitably have more tax questions.

Your friend is already in a dangerous situation. I used to work construction and did the same thing - took about $30k through Venmo last year thinking I was being clever by avoiding "business transactions." Here's what happened: I got a CP2000 notice from the IRS saying I had unreported income. Turns out Venmo had reported the transactions because they exceeded certain thresholds, even though they were marked "personal." I ended up owing the original tax plus penalties and interest. The IRS doesn't care about the Venmo labels - they care about the nature of the money. Your friend should: 1. Talk to a tax professional ASAP 2. Consider filing amended returns if he hasn't reported this income 3. Start keeping proper records of business expenses to offset some of the tax burden 4. Look into making quarterly estimated tax payments going forward Better to fix this voluntarily than have the IRS come knocking.

Just wanted to add something important about Venmo specifically: Starting from 2023 tax year, Venmo/PayPal/Cash App are required to send 1099-K forms for business transactions totaling more than $600/year. "Business transactions" are ones specifically marked as "goods and services." But here's the important part - even if your friend never marks anything as "goods and services" and only uses personal transfers, the money is STILL taxable if it's income. The 1099-K reporting is just one way the IRS catches unreported income, but not the only way. The IRS can also: - Notice patterns of large deposits that don't match reported income - Audit businesses that paid your friend and see those payments - Use their data matching systems to flag discrepancies Your friend should really look into setting up as a proper business (sole proprietor at minimum) and start reporting this income before it becomes a much bigger problem.

As someone who learned this lesson the hard way, I want to emphasize what others have said - your friend needs to act NOW, not wait for the IRS to find him first. I was in a similar boat a few years ago with side consulting work through PayPal. I thought using "personal" payments would keep me under the radar, but that's not how it works. The IRS looks at the substance of the transaction, not the label you put on it in the app. Here's what I wish someone had told me earlier: 1. **Keep detailed records** - Every payment, every business expense, every receipt. Your friend will need these whether he reports voluntarily or gets audited later. 2. **Calculate what he owes** - At $25-50k annually, he's looking at significant self-employment tax (15.3%) plus income tax. Better to know the number now than be surprised later. 3. **Consider quarterly payments** - If he's still taking jobs, he should start making estimated tax payments to avoid underpayment penalties. 4. **Get professional help** - This isn't DIY territory anymore. A CPA who specializes in small business/contractor issues can help minimize damage and set up proper systems going forward. The good news is that voluntary compliance usually results in much better treatment than getting caught. The IRS would rather work with someone who comes forward than chase someone who's hiding. Your friend's paranoia is actually his conscience telling him to do the right thing - he should listen to it.