Is Zelle Required to Report Transactions to the IRS for Personal Use?
With the rise of mobile payment apps driving a digital economy, one must ask if the transactions conducted through these platforms are under the watchful eyes of the IRS. Zelle, being one of the most popular mobile payment options in the United States, has faced such inquiries. This article will explore whether Zelle is required to report transactions to the IRS for personal use.
What Is Zelle?
Zelle is a mobile payment platform that enables users to transfer funds to other people, mainly from one bank account to another. Zelle is accessible to over 100 million people through their bank’s mobile app, making it one of the most widely available payment methods in the United States.
Does Zelle Report Transactions to the IRS?
Zelle does not typically report personal transactions to the IRS, meaning funds sent or received through the app are not reported on the annual 1099 tax form, which is used to report income to the IRS. However, there’s a caveat: banks are required to report transactions over $10,000, including Zelle transactions, to the IRS, as per the Bank Secrecy Act (BSA).
The Bank Secrecy Act (BSA)
The BSA is a law enacted in 1970 that requires financial institutions in the United States to help the government prevent money laundering. This law mandates that banks must report transactions over $10,000 to the IRS on form 8300, which means any transfer above $10,000 made through Zelle will be reported to the IRS, just as any cash transaction would.
Transactions That Need Report to the IRS
Zelle transactions that may be subject to IRS reporting includes payments for goods and services, rent payments, royalties, tax refunds, and income earned from a gig or side job.
Exceptions
If a person receives money from Zelle for personal use, such as splitting the bill at a restaurant or for paying friends back, there is no obligation to report it to the IRS. Basically, according to the IRS, person-to-person payments are not taxable and do not need to be reported.
Conclusion:
In conclusion, Zelle does not report personal transactions to the IRS. However, banks are required by law to report any transaction over $10,000, including those made through Zelle. As long as the transactions remain below the threshold of $10,000, there is generally no obligation to report them to the IRS. It’s crucial to understand the tax implications of any payments you make or receive, especially for business purposes, to avoid any tax-related issues in the future.
