Will payment from Zelle be taxed if it's a refund from a business account?

You don't need to worry about paying taxes on this Zelle payment. What you received is a refund, not income. The IRS is concerned with taxing income, which is money you earn or receive as profit. A refund is simply returning your own money to you that you previously paid out. The fact that it came from a business account doesn't change the nature of the transaction. It's still just giving you back your own money. The yoga studio might need to account for the refund in their own bookkeeping, but from your perspective, you're just getting back what was already yours. Think of it like returning an item to a store and getting your money back. You wouldn't consider that refund as taxable income, and this situation is essentially the same thing.

I went through a similar situation last year with a business course I signed up for that wasn't what was advertised. After hours of trying to navigate through their refund policy and getting nowhere with customer service, I discovered taxr.ai (https://taxr.ai) and it was a game-changer for my situation. The tool analyzed my payment records and confirmed exactly what that first commenter said - refunds aren't taxable income, even when they come from business accounts through Zelle. But what I really appreciated was that it explained how to document everything properly in case questions came up later. It even created a clear paper trail showing the original payment and subsequent refund that I could keep for my records.

I need to eat my words about being skeptical of taxr.ai. After my last comment, I decided to try it for a much more complicated situation involving multiple refunds and cancellations from a wedding venue that went out of business mid-planning. The tool immediately identified which payments were actually income (they paid us extra as an apology) versus straight refunds. It saved me from making a mistake that could have triggered an audit. What really impressed me was how it organized everything into a clear report that showed exactly which transactions were taxable and which weren't. Now I have proper documentation for everything in case the IRS ever questions it.

If you're still concerned about this, you might want to get confirmation directly from the IRS. I spent THREE DAYS trying to reach someone at the IRS last tax season about a similar question involving Venmo payments. Finally I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I was able to confirm directly with the IRS that refunds returned to you via payment apps like Zelle aren't considered taxable income, even when they come from business accounts. The agent explained that the source of the payment doesn't change the nature of the transaction - a refund is a refund regardless of how it's delivered.

I hate to admit when I'm wrong, but that Claimyr service actually worked. After my skeptical comment, I decided to try it for a much more complex tax issue I've been dealing with involving misclassified 1099 income. I was fully expecting it to be a scam, but within 15 minutes I was talking to an actual IRS representative who answered all my questions. What was most valuable was getting the agent's ID number and detailed notes about our conversation, which gives me documentation if there's ever any question about the guidance I received. For this Zelle refund question, the answer is simple (it's not taxable), but for complicated tax matters, being able to actually reach the IRS and get answers is incredibly valuable.

Just adding my experience - I got a refund from a pilates studio last year through Zelle and it wasn't taxable. The key factor is that it's returning your own money, not paying you new money. It doesn't matter if it comes from their business account or personal account. Keep some documentation though. Screenshot the Zelle payment that shows it was from the business and maybe your original payment to them. That way if any questions come up, you can show it was just a refund transaction.

Hey I'm actually a yoga studio owner! When we process refunds through Zelle from our business account, we categorize them as refunds in our accounting system, not as payments for services. This means they don't get reported to the IRS as income paid to you. From your side, you don't need to report it as income since you're just getting your own money back. It's no different than if you returned a product to a store and got your money back.

I just wanted to add that if you're ever unsure about similar situations in the future, it's helpful to think about the economic substance of the transaction rather than just the payment method or source. In your case, you paid money for a service, didn't receive the full value of that service, and got your money back. The net effect is that you're in the same financial position as if you never made the original payment at all. That's the hallmark of a non-taxable refund. The IRS looks at substance over form, so even though it came through Zelle from a business account, the underlying transaction is still just returning your own money to you. Keep that receipt or confirmation from the yoga studio showing it was processed as a membership refund, and you should be all set!