Cash App has become a huge alternative to Venmo to send payments back and forth between friends or businesses. In fact, a lot of freelancers use Cash App to collect invoices for services from small businesses. If you do, then you have to report your income to the IRS.
In this guide, we'll walk you through everything you need to know about receiving a Cash App 1099 such as when you'll receive a 1099, deductions you qualify for, and the taxes you'll need to pay. First, let's review the difference between personal and business Cash App accounts.
Note: if you need help to manage your tax deductions and taxes, try Bonsai Tax. Our freelance tax software automatically scans your bank/credit card receipts to discover tax write-offs. Users typically save $5,600 from their tax bill. Try a 14-day free trial here.
Both accounts are free to set up. However, there are some big differences between a Cash App business account and a personal one. There are some features unique to a business Cash App account that you'll want to consider. Let's review some of them.
Cash App for Business accounts will receive a 1099-K form through the Cash App. The requirements to receive a form 1099-K is if you accept over $20,000 and more than 200 payments per calendar year.
It should be noted that if your tax information is located in Massachusetts, Vermont, Maryland, Washington D.C., or Virginia, Cash App is required to issue a 1099-K for lower than the standard threshold. You'll receive a 1099-K and report to your State when you accept $600 or more in payments.
If your tax information is in Illinois, Cash App is required to issue a 1099-K and report to your state when you accept more than $1,000 with over 3 transactions. If your taxpayer information is associated with Missouri, you'll receive a Form 1099-K if you processed $1,200 or more in a year.
If you don't receive a form 1099-K from Cash App but you still received non-employee payments via a business, you may still receive a 1099-NEC. A form 1099-NEC is required to be sent to freelancers who earned more than $600 in non-employee compensation.
President Biden passed a law for 2022 that lowers the minimum threshold for Form 1099-K, a form filed by the Payment Settlement Entities (PSEs) to report gross amounts of all reportable payment transactions. In 2022, the threshold will be lowered to $600 according to the American Rescue Plan instead of $20,000. Many folks who try to avoid a PayPal 1099 or other third-party settlement networks, will now receive a tax form and must report.
For more information about 1099 forms, visit the IRS's site.
Since Cash APP was designed to send payments from user to user for personal transactions, you will not be liable for taxes if you send payments to friends or peers.
These include paying rent, splitting a cab or dinner fare, or receiving cash as a gift.
The IRS does not count these payments to be taxable income.
If you use Cash App to pay for transactions in regards to business expenses, then you'll need to keep clean records of the invoices, expense reports, and receipts. You'll need this information in case of an IRS audit. You would not want to get audited without tax receipts and detailed information for each invoice from your vendor, which needs to include the total amount paid / a brief description of the payment/
It's a good idea to closely monitor all your freelancing transactions, regardless if you use the app.
If you are a freelancer, read our article for a list of 1099 business expenses commonly deducted by self-employed folks.
Note: If you want an easy way to track and record all your freelance tax deductions at the push of a button, try Bonsai Tax. Our app can help you by scanning your bank/credit card statements to discover tax write-offs. Freelancers who get our app, usually save $5,600 from their tax bill. Additional features include notifications for important filing deadlines and estimating your total tax liability for the year. Claim your 14-day free trial now.
If you send payments to other freelancers' services using Cash App, you'll need to directly send them a 1099 form so they can report their taxes. Cash App is considered a platform to send payments so it will NOT send out a 1099 form to freelancers you work with for tax reporting.
The requirements to send out 1099-NEC forms are:
We hope this article helped to provide you with all the information you need to file your report for your Cash App taxes. Remember, all income should be reported to the IRS. If you need help, read our guide on how to file a 1099-K.
If you have any questions about reporting or filing your 1099 for Cash App, please contact a tax professional or CPA at the end of the year. A tax expert can help you avoid any trouble (or costly penalties!) with the IRS. Bonsai Tax can help you stay on top of all your deadlines and record all of your tax deductible expenses.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?