Many people are done carrying cash because of how easy it is to send money from our smartphones. Payment apps such as Venmo, Zelle and Paypal are commonplace, and some of these peer-to-peer networks are even being used by businesses or service providers.
"It really was designed for payment between two trusted parties," said Scott Arendsen who works at The Parlor in Encinitas. "You know, friends, family, but not as a means of business payment."
But now businesses are using these apps, and the IRS is paying closer attention to making sure that income is reported.
"More and more people were starting to use these third-party pay apps," said Ena Askia-Reese, a tax preparer at Liberty Tax. "They can't keep track of it."
Get top local stories in San Diego delivered to you every morning. >Sign up for NBC San Diego's News Headlines newsletter.
Askia-Reese said there are no new taxes being added, but the IRS is making sure income from those apps is treated just like income from anywhere else.
"Before it was more of the honor system," said Askia-Reese. "That's how taxes started in our country."
Starting this tax year, the apps are making it easier for the IRS to track payments that should be reported as income. Some are now offering business accounts, and will send people who have more than $600 this year in transactions a 1099-K.
Local
Arendsen says he understands the idea people might have to try and avoid paying taxes on payments made on these apps, but doesn't think it's a good business strategy.
"The appearance of having your clients issue you a payment under the guise of something else isn't a good practice," said Arendsen.
However, these requirements only apply to people using payment apps to receive income. Paying friends and family for dinner or the ride that you shared doesn't count.
On apps like Venmo, you are given the option of selecting if the money you are sending is a purchase for goods or services. If it is, you get some customer protection as well.
"People just need to be careful when they're making the choice on what they're paying for," said Askia- Reese. "When marking if it's a friend or if it's a business."
