How to easily file your cash app 1099 taxes

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 7-day free trial here.

Cash app 1099 personal account vs business accounts

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.

• A personal account can send an unlimited amount of money without any transaction fees. A business account is charged 2.75% per transaction for receiving through the account.
• Business accounts can create a custom payment link and share it with their customers. This allows non-Cash App users to send payments to your business. Another great feature is that you can include branding information like your website when you send and receive money.
• Both Cash App accounts are allowed to do a standard bank deposit without for free as well as instantaneously for a 1.5% deposit fee.
• Although business accounts can receive an unlimited amount of money, business account holders, who have verified their identity can only send up to $7500 per week.
  

When will cash app 1099 personal account users receive a 1099-K?

Cash App for Business accounts will receive a 1099-K form through the Cash App. The requirements to receive a form 1099-K are if you accept over $20,000 and more than 200 payments per calendar year.

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.

How to use a 1099-NEC for tax reporting

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 2024 that lowers the minimum threshold for Form 1099-K, a form filed by Payment Settlement Entities (PSEs) to report gross amounts of all reportable payment transactions. In 2024, the threshold is lowered to $600 according to the American Rescue Plan instead of $20,000. Many people 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.

The IRS updated reporting thresholds for Form 1099-K in 2024

What are the new Form 1099-K thresholds for 2024?

The IRS lowered the reporting threshold for Form 1099-K starting in the 2024 tax year. Payment processors like Cash App must now issue a 1099-K if a user receives more than $600 in total payments, regardless of the number of transactions. This is a significant change from the previous threshold, which required both over $20,000 in payments and more than 200 transactions.

This update means many freelancers and small business owners using personal Cash App accounts may receive a 1099-K for smaller amounts of income than before. For example, if you received $700 from clients via Cash App in 2024, you should expect a 1099-K even if those payments came in just a few transactions. This change aims to improve income reporting and tax compliance.

To stay compliant, track all payments received through Cash App carefully. Using accounting software like QuickBooks Self-Employed or Bonsai’s invoicing tools can help you reconcile these payments with your reported income. This proactive approach prevents surprises when you file your 2024 taxes.

How does the new threshold affect personal Cash App accounts?

Personal Cash App accounts are now more likely to receive a 1099-K due to the $600 reporting rule. Previously, many users avoided receiving 1099-Ks because their payment volume or transaction count was too low. In 2024, even casual freelancers or side hustlers using a personal account must prepare for tax reporting if they cross the $600 mark.

For example, if you use your personal Cash App account to accept payments for freelance graphic design or tutoring, and you receive $650 in a year, Cash App will send you a 1099-K. This form reports your gross payment volume to the IRS, so you need to include this income on your tax return, even if you did not receive a 1099-NEC from clients.

To avoid confusion, consider separating personal and business transactions by creating a dedicated business account on Cash App or another payment platform. This separation simplifies bookkeeping and helps you track deductible expenses related to your freelancing or small business activities.

What steps should freelancers take to prepare for 1099-K reporting?

Freelancers should start by reviewing all payments received through Cash App and other platforms to identify amounts that exceed the $600 threshold. Keeping detailed records of invoices, client payments, and related expenses throughout the year makes tax time easier and reduces audit risk.

Using tools like Bonsai’s expense tracking and invoicing software can automate much of this process. For instance, Bonsai can help you generate reports that match your 1099-K income with your actual earnings and expenses, ensuring accurate tax filings. Additionally, consulting a tax professional familiar with the 2024 IRS changes can provide personalized advice based on your state and business type.

Finally, freelancers should be aware that receiving a 1099-K does not automatically mean you owe more taxes; it simply reports income to the IRS. You can still deduct business expenses to lower your taxable income. Staying organized and proactive with your finances will help you navigate these new reporting requirements smoothly.

Does cash app 1099 personal account require tax reporting for personal transactions?

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.

Examples 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.

How to use cash app for business expenses

If you use Cash App to pay for business expenses, keep clean records of invoices, expense reports, and receipts. You need this information in case of an IRS audit. Avoid being audited without tax receipts and detailed information for each invoice from your vendor, including the total amount paid and a brief payment description.

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.

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How to send money to contractors using cash app

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 include:

• The payment is paid to a non-employee of yours.
• Payment is provided in exchange for services rendered during the course of your trade
• The payment is made to a person, a partnership, an estate, or a company.
• The total payment for the year is at least $600.

How to file taxes for cash app 1099 personal account

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.