Is Zelle safer than Venmo?

In a Consumer Reports review of the most popular payment apps, Zelle and Venmo had similar scores for safety practices. Neither network will reimburse you for user errors like sending money to the wrong person or adding too many zeroes. Money sent through Zelle does has FDIC protection since it's sent and received through FDIC-insured bank accounts. This protection only applies to funds sent through direct deposit or remote check capture in Venmo. Both networks fall short when it comes to how they handle your data. They collect information about your contacts and location, and Venmo also has access to your bank account log-in details. Yet, neither company is forthcoming about what they do with this information and how long it stays on their servers.

What is the limit on Zelle transfers?

Each bank sets its own limits on how much money you can send through Zelle. For example, Bank of America will let you send up to $3,500 every 24 hours. Wells Fargo and Regions customers can have different limits, depending on their account and online banking history. Check with your bank to find out how much you will be able to send each day through Zelle.

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Does Zelle Report to the IRS? Your Guide to Taxes and Zelle

July 26, 2023

5 min Read

Written by Allison Hache

Edited by Katie Wudel

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In 2021, lawmakers included a change to the tax law in the American Rescue Plan that requires third-party network transactions to note and report all payments greater than $600 sent through their networks. This was a notable change for taxpayers who rely on these networks for payments from customers and clients.

The updated guidelines did not affect who has to pay taxes on income — that was never the intended goal. Instead, the intent was to increase tax revenue through greater levels of voluntary tax compliance and lower levels of tax gap. The idea is that individuals will be more likely to report all of their income sources if they know it’s been reported to the IRS. It might have the desired effect, as people are now asking questions like “Does Zelle report to the IRS?”

If you’re one of them, read on to learn about these new reporting requirements and how they affect payments received through platforms like Zelle.

What Is Form 1099-K?

Form 1099-K is an IRS form first introduced in 2011 and is used to report payments from third-party network transactions like Zelle and PayPal. Before the changes made through the American Rescue Plan, third-party payment networks completed the form for customers who received aggregate payments exceeding $20,000 and 200 transactions in a year.

The new law eliminated the 200 transaction threshold and now requires a form for each customer who receives a payment greater than $600 through their system for items they sell, services they provide or property they rent. They do not have to complete the form to document reimbursements between family and friends.

Although the new requirements were supposed to go into effect for the 2023 tax year, the IRS has delayed the implementation. The previous regulations regarding payments of over $600 will continue to apply through the end of 2023.

What This Means

For the 2023 tax year, nothing will change. However, if you are a gig worker or have a side hustle selling items and receive payments from customers through Zelle, PayPal or CashApp, you may get a 1099-K from the network. For example, if you sell a set of wheels online for $1,500 to someone who sends you the money through PayPal on November 1, 2024, PayPal should send you a 1099-K by January 31, 2025, documenting that and all other transactions greater than $600.

What Do You Have To Report To the IRS?

You may be surprised to learn what the IRS considers income in addition to wages, commissions and tips earned through a job with an employer. If you barter your services — like trading babysitting services in exchange for house cleaning — or have student loans forgiven, you may need to report them as income on your tax return. You also need to report unemployment benefits.

The following sources can be considered income, according to the IRS:

Bonuses
Found money
Free tours
Lawsuit damages
Prizes
Royalty payments

Does Zelle Count as Income?

The answer varies. The money you receive through Zelle can be income if it’s in exchange for a service you provide or property you sell for a profit. The money you receive for cleaning houses, preparing taxes, creating websites and more is income. If you sell the clothing your child outgrew to a friend or set up a stand at the farmer’s market to sell your artwork and receive payments through Zelle, you’re technically generating income if you earn a profit on the sale.

When your friend reimburses you for movie tickets or their share of the dinner tab through a Zelle payment, you don’t need to claim the money as income. You also don’t need to view money received as a gift for a birthday, anniversary or life event as income. A tax professional can help you determine what counts as income and advise you on how to report it.

Does Zelle Report to the IRS in 2023?

No, Zelle does not report your payments to the IRS and currently does not have a plan to begin reporting this information. The company notes that the law does not apply to its network since it is a network of FDIC-insured banks. If you receive payment for goods and services that qualify as income, it’s your responsibility to report that income to the IRS.

Final Take — Should You Be Using Zelle?

Whether or not Zelle is the right third-party payment platform for you depends on several factors. First, find out if your bank accepts Zelle payments and which platforms your friends and customers are already using. Then examine the system’s features to determine how they measure up to your needs.

Zelle won’t report your receipts to the IRS, but that shouldn’t be a factor in your decision. The IRS expects you to report your income no matter how you get paid for your work.

FAQ

Is Zelle safer than Venmo?
- In a Consumer Reports review of the most popular payment apps, Zelle and Venmo had similar scores for safety practices. Neither network will reimburse you for user errors like sending money to the wrong person or adding too many zeroes. Money sent through Zelle does has FDIC protection since it's sent and received through FDIC-insured bank accounts. This protection only applies to funds sent through direct deposit or remote check capture in Venmo.
- Both networks fall short when it comes to how they handle your data. They collect information about your contacts and location, and Venmo also has access to your bank account log-in details. Yet, neither company is forthcoming about what they do with this information and how long it stays on their servers.

What is the limit on Zelle transfers?
- Each bank sets its own limits on how much money you can send through Zelle. For example, Bank of America will let you send up to $3,500 every 24 hours. Wells Fargo and Regions customers can have different limits, depending on their account and online banking history. Check with your bank to find out how much you will be able to send each day through Zelle.

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