Mobile Payment Apps Used By Escorts to Avoid 1099-K

Payment apps, like PayPal, Zelle, and Apple Pay have grown so much in popularity they are ubiquitous. Consumers often have more than one. But, other than popularity, what criteria is most important when choosing a mobile payment app? For me, the primary issue is privacy – avoiding the IRS! So, I went on a mission to determine which ones are the safest from prying eyes.

After my many years of flying under the radar with PayPal I’m finally made painfully aware payments sent to me are being reported to the IRS. This is especially unsettling for me since a significant amount of my income is derived from Affiliate Revenue, paid with transfers to my PayPal account.

This tax season, freelancers and side hustlers *like me* will likely receive an unfamiliar form in the mail — IRS tax form 1099-K. After years of delays, the IRS is finally implementing a tax reporting change, which requires third-party payment apps like PayPal, Venmo and Cash App to issue a 1099-K for anyone who earns self-employment income over a certain amount through these apps each year.

This cannot stand.

So, I went about figuring out what apps are popular enough to use for my side hustles but able to fly under the radar with the IRS. If I’m being totally honest – I want an app that criminals are able to use. Then, I finally realized who is the authority on this topic…Artisans of the oldest profession – escorts!

Ok, I’m going to assume we all know what an escort is. Escorts require a mobile payment app that is popular with their Johns…er, uh, clients. But, also able to help shelter transactions from the IRS.

After surveying several escorts (an agonizing task to be sure) here are the top mobile apps frequently used by escorts to accept payment:

• Cash App
• Venmo
• Zelle

Here are typical payment terms on a model website, whose name is Jessica:

Plain and simple, they want it transferred easy and on time via a mobile pay app they can trust. Although not mentioned previously, they often accept gift cards since they are not considered income with the IRS at this time. You’ll notice cash is not mentioned, as many of the elite escorts would rather not carry around so much cash (because they charge soooo much). However, it is generally accepted.

Here is an interesting excerpt from an even more sophisticated escort (Adelyn):

Payment accepted via CashApp, Gold bullion, BTC or¹ ETH. BTC preferred (I used to work with Crypto (ETH c.2017) and can talk about this in person)

She accepts CashApp, gold bullion, and cryptocurrency! We’re seeing more and more small businesses accept Crypto now that it’s becoming mainstream – and they’re hoping to avoid IRS entanglement. But, of course, she lists her preferred mobile payment app CashApp first. An hour with Adelyn is $4,000 minimum, and she seems to be very popular, so I’m sure she has vetted these payment apps thoroughly as any elite model would.

Isabella, on the other hand, has an over the top sophisticated system of some sort:

Deposits and payments are accepted in Cash, CashApp, Zelle,  Gift Cards, Visa, Mastercard, or AmEx. Deposits and payments may also be made by sending money or a certified check directly to my PO Box (inquire at time of booking for details) or depositing cash directly into my business bank account. Refunds of any kind are issued as credits for future services only.

I’m not even going to touch this. As you might have guessed she is also an elite (and extremely cute) escort, although her “sessions” are slightly less than Adelyn. But in order to offer Visa and Mastercard she must have a world class accountant to do her taxes. But, notice CashApp and Zelle are big on her list.

Let’s now learn more about each of these mobile payment apps:

Zelle (editors choice)

Zelle is a mobile payment app that allows users to send and receive money between bank accounts in the United States. Zelle has been around since 2017 and was originally developed by Bank of America, JPMorgan Chase, and Wells Fargo as part of the clearXchange service.

How it works: Zelle transfers money directly from one bank account to another, typically within minutes. It works very similar to PayPal – only it doesn’t report to the IRS. To send money, you only need the recipient’s email address or U.S. mobile phone number. 

Security: Zelle is intended to be used with people you know and trust. You can’t cancel a payment once it’s been sent, and there aren’t the same protections as with a credit card or debit card transaction. Zelle does not report transactions to the IRS, and is more of a private money transfer app.

Taken from the Zelle Website:

I have a small business account. Will Zelle® report how much money I receive to the IRS?

Eligible small businesses can use Zelle^® to send and receive money. Zelle^® does not report transactions made on the Zelle Network^® to the IRS, including payments made for the sale of goods and services. The law requiring certain payment networks to provide forms 1099K for information reporting on the sale of goods and services does not apply to the Zelle Network^®.

Does Zelle^® report how much money I receive to the IRS?

Zelle^® does not report transactions made on the Zelle^® network to the IRS. The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle^® network.

Does Zelle^® report any payments I receive over $600 to the IRS?

Zelle^® does not report any transactions made on the Zelle^® network to the IRS, even if the total is more than $600. The law requiring certain payment networks to provide forms 1099K for information reporting does not apply to the Zelle^® network.

Unlike these other payment platforms, Zelle does not issue a 1099-K form because it doesn’t process payments itself. And, this is the distinction. Venmo and Cash App allow you to carry a balance in the app. Zelle ties directly to a bank or credit union account and funds are transferred directly to and from that account.

Zelle is a peer-to-peer money transfer app that differs from other payment apps in a few ways: 

• Direct bank transfers: Zelle sends money directly between bank accounts, so the recipient receives the funds almost immediately. 
• No fees: Zelle doesn’t charge a fee for instant transfers. 
• Linked to banking apps: Zelle is integrated with many banking apps, so you can use it through your bank’s app or the Zelle app. 
• No fund storage: Zelle doesn’t store funds, so money moves directly between accounts. 

Venmo

Venmo has been known as a secure payment app for years but is now tightening up a bit. If you use Venmo for certain types of transactions, you could be on the hook for taxes. The good news is that personal transactions on the payment platform typically don’t generate tax liability. It’s when you use Venmo for business purposes that you need to prepare for a tax bill.

When you receive payments for goods and services on our platform, the IRS requires Venmo to report that payment activity if you reach the reporting threshold for these transactions. Venmo will issue a Form 1099-K to business profile owners and individuals who have passed reporting thresholds for payments received for goods and services. 

If you reach the reporting threshold and have not provided your tax information in the Venmo app, you will experience backup withholding. Backup withholding is when a portion of your payments is sent to the IRS to ensure that any tax due on those payments is paid. 

How to avoid reporting to the IRS in Venmo?

When you’re sending money to friends and family using Venmo, you typically don’t need to worry about paying taxes or reporting the transactions to the IRS. The trick is to send/receive funds as a gift. Best way is to use their “Giftwrap” feature.

The recipient will receive a notification in the Venmo app and can unwrap the gift to view the animation. Both the sender and recipient can rewatch the animation at any time. Simply tap the Gift button when you’re sending a payment to a friend on Venmo.

Cash App

Cash App functions as a peer-to-peer payment platform where users can send and receive money from one another by linking their bank accounts to the app, using a unique username called a “$cashtag” to identify recipients, and transferring funds directly through the app, essentially acting like a digital wallet; you can also use a Cash App debit card to make purchases with the money stored in your account.

Cash App stands out from the pack by letting users pay for purchases at select merchants, invest in stocks, and even trade Bitcoin. CashApp is free to download and use basic services

Does Cash App report personal transactions to the IRS?

Cash App does not report personal transactions, such as splitting a bill or sending a gift, to the IRS. Only business transactions that meet certain thresholds are reported.

To avoid receiving a Form 1099-K for personal transactions on Cash App, make sure to categorize your payments correctly as personal and provide clear descriptions, such as “dinner split” or “birthday gift.” Cash App, specifically, has business profiles and personal profiles. If you have a personal profile you should not be receiving a 1099-K. 

Conclusion

Overall, the IRS will get you one way or another. Before attempting to avoid taxes it’s best to consult with a good accountant or tax consultant. But, following these guidelines can help you avoid a ton of fees.

Here is a video that explains more about the mobile payment app tax codes that were updated for 2024 tax year: