kaili cochran
Words by Kaili Cochran
With tipping and tax laws evolving, platforms like Cash App are changing not just how people pay, but also what is owed on tax day.
Before 2024, you needed at least $20,000 in payments and 200 transactions from a full calendar year to be required to report earnings. But now, according to IRS.gov, the reporting threshold has been lowered to at least $600 in payments, regardless of the number of transactions. This is per platform, not a combined total.
The 1099-K is an IRS return used to report transactions made through card payments and payment apps. If you receive more than $600 in payments, you’ll receive one of these to file. This applies to any third-party apps including Venmo, PayPal and Cash App.
The number of Cash App users is continuously increasing. What started as a one-on-one transaction app between friends is now widely used in service tipping, freelancing, tattoo shops and barber shops.
According to Priori Data, “Cash App [had] 57 million users in 2024 and is projected to reach 60 million users in 2025.”
The evolution of using Cash App regularly comes from its convenience. It’s an easy-to-use app with customizable handles and QR codes with no swipe fees.
Most usage happens in settings where tipping is common, like small businesses and restaurants.
“As of 2024, the largest share of Cash App user spending goes to Big Box & Discount Retailers (22%), followed by Restaurants (19%) and Other Retailers (15%),” according to Priori Data.
Digital tipping is more convenient but can come with downsides. Some people are unaware that the 1099-K exists (and that they need to report this income) until it’s already tax season.
But even if you are prepared to be faced with the 1099-K, cashless tipping takes away the “fast money” that comes with cash. While funds can be deposited immediately, apps can still freeze funds, delay access and even charge transfer fees.
There is a gray area in taxing third-party apps. Not every form of payment is income, so where is the line drawn? The IRS says gifts are not taxable and service payments are, but how can we tell which is which when sometimes it’s not so obvious?
Cash App includes a Business Account feature for entrepreneurs and business owners. The business feature makes it more convenient to manage and sell goods and services. Although this does not mean you’re exempt from receiving the 1099-K tax form if you aren’t a business owner, it’s more efficient to use the app when you are one.
But some Cash App users aren’t associated with a business at all. Or some who use their account for splitting lunch, gifting birthday money and getting paid for work, without setting up a business account. This can make it difficult to properly track what is taxable and what isn’t.
Cash App now requires a memo for all transactions in order to close any loopholes. According to Block Inc., requiring a note eliminates any guesswork down the line for what each payment was for. This allows for clearly seeing what was for subscriptions, rent, or splitting the bill with friends.
Cash App and other third-party platforms have redefined how we tip, how we track and how we’re taxed. In the app economy, every dollar leaves a digital footprint, transforming simple acts of gratitude into complex tax considerations. Service workers and users should stay informed and prepared to navigate this new change in filing taxes.
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