Services like Zelle® are a quick, convenient, and accessible way to send and receive money without needing a trip to the bank. However, as their popularity grows, you may be wondering about the tax implications. Whether you’ll owe taxes on Zelle® transactions isn’t a simple “yes” or “no” answer. Let’s look into Zelle® taxes and whether they report to the IRS.
Note: “Zelle® taxes” isn’t an official term, but we may use it throughout the article to refer to how the IRS treats money you receive through bank-to-bank services like Zelle®.
Does Zelle® report to the IRS?
The first big question here is whether Zelle® reports to the Internal Revenue Service (IRS).
Zelle® does not report its transactions to the IRS or impose taxes. This means you won’t be receiving a Form 1099-K from Zelle® directly, and the network won’t withhold tax from any payments you receive.
Bank-to-bank transfer network
The main differentiator here among similar applications is that Zelle® is a bank-to-bank transfer service, setting it apart from third-party settlement organizations, like PayPal®, Venmo®, and Cash App®. As a bank-to-bank transfer network, Zelle® is directly connected to your bank account, so any payments you send or receive are sent from or to that account. Unlike Venmo®, there’s no way for Zelle® to hold your balance in the app. It’s more of an extension of your bank account than a separate payment service.
The IRS requires third-party settlement apps, such as Venmo® and Cash App®, to send you Form 1099-K if reporting thresholds are met, but this rule doesn’t apply to Zelle®. Zelle® isn’t required to send you Form 1099-K, meaning you’ll need to report any taxable income you’ve earned through the network yourself (depending on your net earnings).
Are Zelle® payments taxable?
Zelle® payments aren’t taxable on the app itself, but you still may owe taxes to the IRS on payments you receive. This generally applies to payments for self-employment or other taxable income. More common personal payments, like sending and receiving money from friends and family, typically aren’t taxable.
Do you have to pay taxes on Zelle®?
Because Zelle® is a bank-to-bank transfer network, they aren’t legally required to send you a Form 1099-K. However, you still may owe taxes on any business or self-employment income you’ve earned through using the app.
Do you have to report Zelle® on taxes?
Zelle® payments generally become taxable if they come from self-employment (think side gigs and independent services). If your net earnings from self-employment for the year total $400 or more, the IRS requires you to report that income on your tax return as you may owe self-employment tax.
What kind of transactions are taxable?
Whether you need to report your Zelle® transactions to the IRS depends on whether the payments are taxable.
Examples of taxable income through Zelle®
Taxable payments on Zelle® generally include any type of transaction that’s generating business income through self-employment —think freelance, gigs, side jobs, and services.
- Small business owners offering beauty services like hair, eyelash extensions, eyebrow laminating, etc.
- Selling homemade work, like pottery and other crafts
- In-home tutoring
- Home services, such as cleaning, gardening, handywork, etc.
- Baby or pet sitters
Examples of nontaxable transactions
Some common examples of nontaxable transactions on Zelle® include:
- Sending your friend money to cover your portion of the dinner bill
- Gifting a family member money for their birthday
- Sending a friend or family member money to pay for a flight or hotel room
Gifts typically aren’t considered taxable income for the recipient. However, in some cases, the giver may need to file a gift tax return if the gift exceeds the annual exclusion amount. For tax year 2025, that annual exclusion is $19,000 per recipient.
How to report Zelle® payments to the IRS
If you receive business payments through Zelle®, you’ll report that income and related expenses on Schedule C (Form 1040). If your net earnings from self-employment are $400 or more for the year, you must also use Schedule SE to figure your self-employment tax. While $400 or more is the federal threshold, state thresholds may vary.
You’ll include your net earnings through Zelle® on the Part I: Income section of Schedule C.
How to calculate self-employment tax on Schedule SE
We’ve included a preview of Part I of Schedule SE below:
You can use Schedule SE to determine how much self-employment tax you owe. As mentioned above, you usually file Schedule SE only if your self-employment earnings are $400 or more. The tax rate for self-employment is generally 15.3%, and the IRS
- Self-employment income for Schedule SE = your net profit from self-employment × 92.35%
- Self-employment tax = that result × 15.3%
Note: When figuring how much you owe, you should use your net profit, not gross income.
Will Zelle® send me a Form 1099?
No, Zelle® won’t send you a Form 1099-K. Because it’s a bank-to-bank transfer service and not a third-party payment app, Zelle® doesn’t have a reporting requirement to send you a Form 1099-K for any payments made on the app.
FAQs
The bottom line
If you’re self-employed and earning money through the Zelle® network, you should file that income on your individual tax return. However, if your friend reimbursed you for dinner or you received a personal gift, that payment would usually not be taxable income.
Self-employed? File your individual tax return with TaxAct®.
This article is for informational purposes only and not legal or financial advice.
All TaxAct offers, products and services are subject to applicable terms and conditions.
