Ask the Expert: Must 3rd-party apps issue 1099s for gifts?
This shouldn’t become a headache.
Gifts aren’t subject to the 1099-K reporting rule because they aren’t taxable to recipients. (And they’re taxable to the donor only if they exceed a $12.06-million lifetime limit.
True, third-party payment companies must now report $600-plus payments for goods and services to the IRS on Form 1099-K and send a copy of the form to the payment recipient. But Venmo and PayPal ask their users to check a box indicating whether a payment is a gift or a business transaction. If you check the right box — and take care to send gifts to the recipients’ personal accounts, not their business accounts — no 1099s should be issued for your gifts.
Zelle isn’t subject to the 1099-K reporting rules that apply to third-party settlement companies. For tax regulatory purposes, it’s considered an “automated clearing house” doing direct bank-to-bank transactions; so it doesn’t issue 1099s. But this doesn’t mean people can evade reporting taxable income by using Zelle. You’re legally required to report income from business transactions on your return whether or not it’s also reported on a 1099-K.
The bottom line
Third-party payment platforms aren’t required to issue 1099s for payments that are gifts.
