You may have heard some buzz in previous tax seasons that peer-to-peer payment apps like PayPal, Venmo, and Cash App were required to report business transactions above certain thresholds to the IRS.
Are digital payments made through Zelle subject to the same reporting requirements?
The short answer is no. Unlike third-party payment processors, the Zelle network does not issue a Form 1099-K for the purposes of tax reporting. However taxpayers should know that business income received through Zelle still needs to be included on your federal tax return.
Let’s dive deeper into what makes Zelle different and what small businesses, freelancers, and self-employed workers need to know about declaring taxable income from Zelle on this year’s income tax filing.
What makes Zelle different from other payment apps?
Instead of thinking of Zelle as a payment services provider, consider it a part of the payment networks between participating banks and their customers. Through the bank’s website or mobile app, Zelle allows users to make both business and personal transactions between different financial institutions.
The critical distinction between payment platforms like Venmo or PayPal and Zelle is that Zelle transfers money directly between users’ bank accounts. The other platforms function more like a digital wallet, allowing users to keep money on the platform and providing buyer protection or disputed transaction resolution services.
These differences make Zelle exempt from the IRS reporting requirements for third-party payment apps. However, money received on Zelle as payment for goods and services is still subject to tax reporting rules.
Read more: What is Zelle and is it safe to use?
Does Zelle report transactions to the IRS?
As previously stated, whether the payments are personal or professional, Zelle doesn’t report your transactions to the IRS. That means even if transactions in your business account meet the new tax reporting threshold, you won’t receive a 1099-K form for the tax year and neither will the IRS.
But it’s important to stress, especially for business owners, that the absence of a tax form doesn’t mean you don’t have tax liability for money transferred with Zelle. If you received payments for goods and services through the network and you’re not sure if you should include those transactions in your federal tax filing this year, consult a tax professional.
Should I still report my Zelle business payments if I didn’t get a Form 1099-K?
Even though Zelle doesn’t issue you a form detailing tax information for your federal or state filing, that doesn’t mean you can skip reporting the income. Personal payments between friends and family, like reimbursement for a shared restaurant bill, are not considered taxable, but any money you received in either your business or personal account for providing goods and services needs to be reported to the IRS.
Keep careful and accurate records and report business payments you receive as a sole proprietor, self-employed contractor, or freelancer in Schedule C of Form 1040 for “Profits and Loss from a Business.” If you’re not sure how to correctly report this income, consult a certified public accountant (CPA).
Read more: 7 ways to do taxes online for free
Is Zelle a loophole for the tax rules that apply to other payment apps?
Zelle’s exempt status from IRS reporting rules does raise some eyebrows and some confusion for the average taxpayer. But keep in mind that if a client pays you through Zelle for goods or services you provide as a self-employed individual, you should also receive a 1099-NEC if those payments exceed $600.
In contrast, other third-party payment platforms like Venmo, PayPal, and Cash App must disclose business transactions of $5,000 or greater to the IRS for the 2024 tax year. In 2025, that reporting threshold will lower to $2,500, and by 2026, business transactions totaling $600 or more will prompt payment apps to issue a 1099-K form.
Read more: Do you have to pay taxes on Cash App transactions? Here’s what the IRS says.
Zelle tax reporting FAQs
1. Does Zelle have to follow the $600 tax rule like PayPal, Venmo, and Cash App?
No. Because of how the network transfers money, Zelle is exempt from tax reporting rules that apply to other payment apps.
However money received through Zelle for the payment of goods and services is still considered taxable income and should be included on your federal tax filing under Schedule C of your 1040 Form.
2. Is Zelle shutting down?
Zelle isn’t shutting down, but its standalone mobile app is being sunsetted and is no longer available. The company says only a small fraction of transactions were initiated on the mobile app, so it’s pivoting to support Zelle through its network of banks and credit unions.
This should help eliminate some confusion about Zelle serving as a third-party payment service and avoid implications that it shares the same tax reporting responsibilities.
