If you’re receiving a large gift of money through Venmo, PayPal or other virtual payment services, you may get a 1099 form.
According to a new Internal Revenue Service rule, 1099 forms will be sent to those who get at least $600 in a single transaction through these services. The intention was to provide these forms to people who use online payment services to receive freelance income.
But for those sending and receiving gifts, the forms could add to some confusion.
According to the IRS, a payment from “friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.”
The IRS added that if a person receives a gift or payment that shouldn’t be taxed, that person should contact that service as soon as possible.
It is possible that the giver may have to report a large gift to the IRS. According to the IRS, gifts of over $16,000 to any person other than a spouse must be reported to the IRS. There are a handful of exceptions to this rule, including directly paying for a person’s tuition or medical bills, or a charitable contribution.
Are gifts from employers taxable?
If the gift is a cash bonus, yes. This bonus is treated just like income.
But for other gifts, it might be a bit trickier.
According to the IRS, de minimis fringe benefits, like free food, use of a photocopier, tickets to a performance and similar type of gifts are not taxable.
One gray area is on gift certificates and gift cards.
“Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable,” the IRS said. “A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.”