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Venmo, PayPal and other digital payment methods
Posted by on 2022-03-10 at 9:21 PM
I am very confused about all the new rules on PayPal and Venmo in the USA, but I am a little scared of contacting them directly – not to attract attention to my accounts since I used to tell my clients to pay me as a friend to avoid service fees, and if they wanted to have consumer protection – to add the service fee to the price of the session, some did that and others chose to chance it – as they follow me on social media and trust that I am not a scammer…But now IRS is getting involved with PayPal and Venmo and other cash apps, and I do not know what to do. PayPal just asks the sender if they know the recipient – and my clients usually feel that they know and trust me, am I supposed to tell all clients to pay me as a business? I do not have a licensed business or business bank account – are we still supposed to create a business account in this situation? Can we have both business and personal accounts connected to the same personal bank account? Did anybody have any problems with them before? If they suspect that you are using a personal account for income – can they just cancel your account or would they give you a warning? Are there any other payment methods that do not send you the 1099 form and insist on separating clients and friends – maybe Zelle? Or any other payment methods – that do not specify what the money is for?
I also wonder – how can I take credit cards online? I looked into Stripe and Square – those seem to work with physical cards only, I hear about coaches who have to create a website on these platforms to be able to take cards online – how complicated is this?
I would be very grateful for any advice, I do not care much about Venmo, but I do not want to lose my PayPal account as I use it for shopping…
By the way, if you are asking your clients to pay you as a friend – tell them NOT to write anything in notes or just their name. I did some reading on hairdressers’ sites – and they all take Venmo for haircuts or tips – they ask clients to use emojis on Venmo, as Venmo requires something in the notes…It seems that every hairstylist, street performer, artist, etc is using Venmo for payments to avoid cash during Covid, but it is becoming dangerous…
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7 Replies
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I’m in Canada, not the US, but a lot of the rules are the same. I’ve been doing web design for years and so I’ve piggybacked my hypnosis practice on the same structure. Unless I’m paid in actual cash in person, I assume that the payment is traceable should I get audited, whether it’s deposited into my personal bank account, my business bank account or PayPal. My PayPal account is linked to my business bank account, not my personal one, and it’s rare that it’s used for receiving money other than work-related. My business is not incorporated, so income tax reporting requirements are simpler. Technically I’m “Heather Holm o/a (operating as) Holmpage Productions.
However, there are additional implications for me, as my business is registered for sales tax, so legally must charge tax to Canadian customers according to the rate for each province. I don’t want to charge my local clients more, especially as I live in an economically disadvantaged part of the country, so I use it to favor people here by charging everyone the same and deducting the sales tax from my fee. I send them an invoice to that effect and report it. I’ve known too many people who got in trouble from sales tax audits.
So I “render unto Caesar” and keep my stress level manageable.
For the last few years, I’ve been using WaveApps.com for bookkeeping and invoicing. It has made my life easier. I can now take credit cards through WaveApps, and they take a fee. They did have to verify my bank account, and it may be that it had to be a business bank account; I am not 100% sure.
I tried asking clients for an additional amount to cover fees if they used PayPal or credit card, but it’s (a) more work for me, and (b) awkward. Doesn’t feel professional. From my long experience working with microbusinesses and self-employed people, my conclusion is to set your fees high enough to cover those expenses and keep it simple for the customer. It saves me time and trouble, and that matters too.
I’ve been working with one client who uses Square for product sales. I think she can take credit card orders by phone and enter them into the system. Any such mechanism is going to have a fee. We’ve been working on her website too, so people can place orders. All these website platforms are getting more and more user-friendly. That’s part of why I’m happy to move on to hypnosis work and am not take on new web design clients!
I have no experience with Venmo.
That’s my experience, for what it’s worth.
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I use Mollie that is very interesting because you don’t pay a monthly fee, you just pay at each payment you receive.As a customer, I don’t like Paypal, because they are very intrusive, they ask you a phone number and I put always a fake one because my phone number is unnecessary.
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I looked up Mollie – but it only works in EU and UK, not in North America. I wonder if there is something like this in the USA?
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Have a look on Stripe, I think it is more interesting than paypal.
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@Irina_Nola – thanks for starting this discussion. These are all valid questions and I think many of us who are new businessmen, as myself (I’ve been working in the corporate world full time all my life practicing my spiritual work and writing on a site) would appreciate any advise or shared experience on the topic.
So, for my practice I’m using Zelle and PayPal. Zelle doesn’t charge processing fee but PayPal may charge fees, depending on the type of payments. If PayPal, I usually send my customers payment request. Venmo keeps sending me discount offers but I just haven’t had time or need to get to using another service bit I might in the future. To my knowledge, PayPal and Venmo do report income if earnings are above $600.I don’t take credit cards yet but am considering trying Stripe as I’ve heard positive feedback from those using it. I will look into WaveApps (@Heather_Holm – thanks for mentioning.)
Regarding business account vs. personal – I think although business account might be a bit harder to manage but from a business perspective it’s better to connect it to a business account than to a personal. Tools such as quick books, waveapp, etc might be helpful. Hope this helps.
Thanks again for starting this discussion.
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There are some new local currencies created. In my area in South-West France, we have this new local currency, you can pay at your local baker, butcher, etc…
We must find ways to escape the Total Control that is coming 🙂
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Irina, I *doubt that your account would get cancelled, and I don’t think there’s a problem with using an account for both personal and business. (but please correct me if I’m wrong on this) My impression is that it’s more about reporting income earned and received — that’s why they’re saying it’s to generate a 1099 tax form for you. So in light of that, it would probably be wise to report any income (at least from this point forward) you’re receiving through them when you do your taxes.When you’re seeing clients in person, you could always ask for cash, and as incentive — offer a discounted rate for those who pay in cash.Or you could take checks — but I don’t know if there’s a good way to deal with checks to make sure they don’t bounce. Perhaps there’s a way to take electronic check payments online in advance — and that would ensure that they go through. No idea about this. The only e-check online payment experience I have is with utility companies. Or if someone is booking far enough in advance, maybe they could mail you a check for pre-payment.Thanks for starting this thread. I only just discovered this change with paypal today — demanding to know your tax status, etc.Is there any such thing as a tax-exemption for healing services — anywhere?(besides religious organizations of course)
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