Here’s What Youth Sports Organizations Need to Know About the New Venmo Tax Rules
By Melissa Wickes
June 21, 2023
Many youth sports organizations collect registration payments through apps like Venmo, PayPal, and CashApp. The apps have historically made the lives of the organizations and families easier by providing another option for parents to pay if they are unable to pay with cash, check, or if the organization is not using a designated payment platform like LeagueApps.
However, new IRS reporting requirements will come into effect this upcoming year (for the 2023 tax year), and this could change a lot for youth sports organizations.
What is the rule?
According to the IRS, the rule will require anyone who earned over $600 on payment apps in 2023 to file a 1099-K form. The threshold in the past was $20,000 on over 200 transactions—that’s a big change!
Lisa Greene-Lewis with TurboTax tells CBS News that this is not a tax law change. “This is just a reporting requirement for those third parties like Venmo, PayPal, and the credit card companies,” she explains.
This regulation only applies to payments received for goods and services, not personal payments (like paying a friend back for dinner). To determine whether or not specific amounts are classified as taxable income, you should always speak with a tax professional.
For more information about what makes payments reportable, you can watch this quick video by Venmo:
If you sell at least $600 in goods or services on Venmo or another payment settlement entity (like PayPal, Stripe, Square, etc.) you’ll be issued a 1099-K form at the beginning of the following tax season and a copy will be sent to the IRS. This will allow you to avoid any payment holds and subsequent backup withholding, and enables Venmo to provide accurate information on your tax forms. Backup withholding is when a portion of your payments is sent to the IRS to ensure that any tax due is paid, and this money can’t be returned to you. If you neglect to provide this information, you’ll continue to experience tax holds and 24% backup withholding on payments you collect for goods and services throughout the year.
What does this mean for my youth sports organization?
Many youth sports organizations, particularly nonprofit ones, are ditching the payment apps and going back to the days of checks and cash due to these new reporting requirements. However, doing so puts you at risk of making payment reporting errors and potentially getting into tax trouble with the IRS.
If you’re affected by these new payment app tax requirements and considering other options, many youth sports softwares provide seamless payment options that allow you to stay organized and collect more fees.
To learn more about LeagueApps’ flexible payment options and how they can be an alternative to Venmo, PayPal, and other payment entities, set up a call with one of our youth sports experts today.