Do your clients like using Venmo for payment? Things are changing in this space with IRS reporting and if you aren't on top of it, you may be putting yourself quickly on the IRS radar.
Is using Venmo for business ok?
From taxes, to reconciliation to fees. Is it worth it? How do you stay above board?
Pros and cons of using Venmo?
The pro of using Venmo is simply that clients like it, find it easy to make payments with and DO make the payment, so you aren't chasing money down after the fact.
...I can get on my soapbox on this topic, but you must make it EASY for your clients to pay!
The cons of using VENMO are the reporting of transactions to your bookkeeping, reconciling transactions and fees, and simply that Venmo reporting is lacking and doens't integrate well with accounting software.
...wait? there are no merchant fees!....only personal accounts don't have fees.
Business use of personal Venmo will land you in hot water
Let's face it, we've been using our personal Venmo for all business and personal transactions because it was free and there was never a business option.
That has changed.
Venmo is cracking down on business transactions and now wants you to open a business account.
In fact, when people pay you with Venmo they now ASK them if the payment was for a product or service!
They know this and are flagging and tracking personal accounts.
If you use Venmo for business payments, I recommend you open a separate account
- To keep your business transactions separate and
- To keep your INCOME reporting TO your business so that you don't get a Venmo 1099-K at the end of the year to your personal social security number.
Reporting of 1099-Ks to the IRS
Venmo, Paypal, and other 3rd party payment gateways have compliance requirements that they must report 1099-Ks to the IRS at the end of the year to report HOW MUCH MONEY you made.
If you are using your personal account, this reporting will be sent to the IRS that you personally MADE THIS INCOME.
If you don't report it on your personal tax return, the IRS will likely flag it.
If you have a business Venmo account under your business EIN, the 1099-K will go to the IRS with your business EIN on it, where you will report that income on your business tax return.
If you are tracking your business transactions, it will match and not cause problems.
Record all Venmo purchases and income in your books
Download reports even if it means you have to screenshot the transactions and get those purchases and sales into your accounting software.
1099-Ks should NOT be a surprise at the end of the year if you are keeping your books up-to-date and above board throughout the year.
Venmo does not currently make this easy with its subpar reporting. If it is too much of a hassle to reconcile these accounts every month, consider other payment options that integrate more easily and provide better reports.
Will you keep using Venmo?
Need help?
>>> If you need help setting up your QuickBooks Online and integrating with a 3rd party payment software, send us an email with details and get a quote.
>>> If you received a 1099-K issued to your personal social security number, this may need to be FIXED on your tax return. If you filed your taxes and didn't fix it...and received an IRS CP2000 letter stating a discrepancy of income, let us know and we may be able to help with your response to resolve it.
