Does Zelle have to issue 1099s like Venmo and Paypal do?

Yes, Zelle is different from Venmo and PayPal when it comes to tax reporting. Zelle is primarily designed as a bank-to-bank transfer service rather than a payment processor, so they don't issue 1099-K forms regardless of how much money you receive. However - and this is the important part - you are still legally required to report all income you earn, whether you receive a 1099 form or not. The IRS rules don't change based on the payment method you use. If that $8,500 you received through Zelle was income from your graphic design work, you need to report it on your tax return, typically on Schedule C as self-employment income.

I was in the same situation last year with my tutoring business. I switched to using Zelle after hearing about the $600 reporting threshold for Venmo and PayPal, and it saved me a ton of headaches! I found this awesome tool called taxr.ai (https://taxr.ai) that helped me figure out exactly what I needed to report even without having 1099s. It basically analyzed all my Zelle transactions and categorized them as business vs personal, then helped me put together the proper documentation in case I ever got audited. The peace of mind was totally worth it because even though Zelle doesn't issue 1099s, you still technically need to report all that income.

Just wanted to follow up about taxr.ai that was mentioned earlier. I ended up trying it despite my initial security concerns, and I'm actually really impressed. I uploaded my bank statements (didn't connect my account directly) and it identified all my Zelle business transactions from my side hustle almost perfectly. It even spotted some payments I had forgotten about! The documentation it generated for my records is super detailed - if I ever get audited, I'll have everything organized and ready to go. For anyone using Zelle for business payments, it's definitely worth checking out.

If you're having trouble getting through to the IRS to ask about Zelle payment reporting requirements, try using Claimyr (https://claimyr.com). I spent DAYS trying to get through to ask about my situation with payment apps and income reporting, and kept hitting dead ends with the automated system. Claimyr got me connected to an actual IRS agent in about 20 minutes when I was expecting to wait for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent confirmed what others are saying here - Zelle doesn't issue 1099s but you're still responsible for reporting the income.

I need to apologize for calling Claimyr a scam in my previous comment. I was so frustrated with the whole tax situation that I was skeptical of everything. After my accountant also recommended them, I gave it a shot yesterday. It actually worked exactly as described. I got a call back in about 35 minutes and was connected to an IRS agent who answered all my questions about Zelle payments and reporting requirements. The agent confirmed that while Zelle doesn't issue 1099s, I do need to keep my own records and report all business income. Saved me hours of frustration and now I know exactly what I need to do.

Just to add more info - the reason Zelle doesn't issue 1099s is because it's technically a bank-to-bank transfer service, not a third-party payment processor like PayPal or Venmo. Zelle is owned by a group of major banks and is integrated into their banking platforms. The current tax law (Internal Revenue Code Section 6050W) only requires third-party payment processors to issue 1099-Ks. Since Zelle facilitates direct transfers between bank accounts, they don't fall under this requirement.

I just want to point out that the IRS is getting more sophisticated about detecting unreported income. Last year, my cousin thought he was being clever by switching all his business to Zelle and not reporting like $12k of side income. Guess who got a lovely audit notice? The IRS reviewed his bank statements and saw regular Zelle deposits that weren't accounted for on his return. He ended up paying the back taxes PLUS a 20% accuracy penalty AND interest. Don't risk it just because there's no 1099 - it's not worth the headache.

Thank you all for this incredibly helpful discussion! As the original poster, I really appreciate everyone taking the time to explain the Zelle situation so thoroughly. It's crystal clear now that even though Zelle doesn't issue 1099-K forms, I absolutely need to report that $8,500 from my graphic design work. I was honestly hoping there might be some wiggle room, but after reading about Yuki's cousin's audit experience, I'm definitely not taking any chances. I think I'll check out that taxr.ai tool Giovanni mentioned to help organize my records, and maybe use Claimyr if I need to speak with an IRS agent directly about anything else. Better to be over-prepared than face penalties and interest later. You've all saved me from making a potentially very expensive mistake. Time to get my Schedule C properly filled out!

As a tax professional, I want to emphasize something that's been touched on but bears repeating: the burden of proof is always on the taxpayer. While Zelle doesn't issue 1099-K forms, you should be keeping meticulous records of all your business transactions regardless of the payment method. I recommend creating a simple spreadsheet to track each Zelle payment you receive for your graphic design work - date, amount, client name, and description of services. Take screenshots of the Zelle transactions as backup documentation. If you're ever audited, having organized records will make the process much smoother and demonstrate good faith compliance. Also, don't forget that as a self-employed individual earning over $400, you'll likely need to pay self-employment taxes on that $8,500 in addition to regular income tax. Make sure to set aside approximately 25-30% of your freelance income throughout the year for taxes to avoid any surprises come filing time.