How does the $600 reporting threshold apply for CashApp payments in 2024 Tax Season?

Wait, so these apps actually report to the IRS? I split rent with roommates and we venmo each other all the time. do I need to be marking these as personal explicitly? I've literally never noticed that option.

Yes, payment apps like Venmo and CashApp do report to the IRS when certain thresholds are met. You should definitely be marking your roommate payments as "personal" rather than "goods and services." The option is usually presented when you're sending money - there's typically a toggle or selection where you can specify the payment type. Many people overlook this feature, but it's becoming more important with the lower reporting thresholds. Personal payments aren't subject to the same reporting requirements as business transactions, so properly categorizing your roommate reimbursements will help avoid confusion.

How exactly does this work? Does it connect to your payment apps or do you have to manually input all your transactions? My partner and I probably exchange thousands throughout the year for various bills and expenses.

Sounds like another service trying to profit off tax confusion. Can't people just label transactions correctly and be done with it? Why would anyone need a special tool for something so straightforward?

The service doesn't need to connect to your payment apps. You just answer questions about your situation and upload any relevant documents if needed. It then analyzes everything and gives you personalized guidance. For our situation, it helped us understand which transactions needed special attention and which were completely fine. The value isn't just in labeling transactions - it's understanding the entire picture of what counts as taxable income versus personal reimbursements. Many people don't realize that even properly labeled transactions can sometimes require explanation if they trigger certain thresholds or patterns.

How much does this cost? Sounds like something the IRS should provide for free. Why should we have to pay to talk to an agency our tax dollars already fund?

This sounds too good to be true. The IRS phone system is notoriously bad. How could they possibly get through when no one else can? I've tried calling multiple times about a missing refund and couldn't get through.

There is a fee for the service, but I found it worth it compared to wasting hours on hold. I agree it's frustrating that we need to pay for something that should be accessible, but that's the reality of how underfunded IRS customer service has become. They use a combination of technology and timing to connect with agents more efficiently than individuals can. From what I understand, they have systems that dial continuously during optimal times and use phone line techniques that most people don't know about. I was skeptical too, but when I got that callback with an actual IRS agent on the line, I was convinced.

Would this work even if one person is on most of the leases/accounts? Like in our case, almost everything is in my girlfriend's name because she moved in first. Is there a clean way to do this split without her technically paying me?

Yes, this can still work! You don't need to have your name on the accounts to pay them. Most utility companies let anyone make payments on an account. You can set up online bill pay through your bank to send payments directly to those companies, or use their guest payment options on their websites. You can also consider adding your name to some accounts over time if the companies allow it. But even without that, direct payments to the companies instead of reimbursing your girlfriend eliminates the whole issue of payment app reporting. Just make a list of which bills you're each responsible for and pay them directly.

But how does the IRS know what's business vs personal? If she gets thousands in cashapp over the year, couldn't they just assume it's business income and audit her?

The IRS relies on the payment apps to report the transaction type when they send 1099-K forms. When you mark payments as "personal" in CashApp, that information gets included in their reporting. However, if someone does get a 1099-K that includes personal payments by mistake, they can explain it on their tax return. The key is documentation - keeping records showing these are shared household expenses (like lease agreements, utility bills showing both names, or even simple text records of what each payment was for) makes it easy to demonstrate these aren't business transactions if questions ever come up. An audit would be pretty straightforward to resolve with basic documentation showing it's just roommate expense sharing.