Zelle Taxes: Why This Payment App Is Different

Does Zelle report to the IRS?

If you made 200 transactions and received $20,000 in taxable business income via an online payment app in 2025, the IRS will be able to find out about it through a Form 1099-K sent by that platform in January 2026. On Zelle, there’s no such form requirement.

However, if you have taxable business income from Zelle, you will still need to report it correctly. The law doesn’t allow you to avoid taxes just because you don’t get a tax form. 

Think of income from Zelle like a payment in cash. It might be harder for the IRS to find out about such payments. But if federal agents determine that you deliberately concealed taxable income — say through an audit that looks at other business records — you could be in line for serious legal headaches. 

“If payments you receive on the Zelle Network are taxable, it is your responsibility to report them to the IRS,” Zelle says on its website^[0]

» What do you owe? Check out NerdWallet’s tax calculator

Is there a Zelle tax loophole? 

While it’s true that tax reporting rules governing other payment services don’t apply to Zelle, the actual rules about how income is taxed are the same regardless of how you receive the money. Remember: just because Zelle isn't required to send 1099-K forms, that doesn't mean you don’t have to pay taxes on your business income. You still must report all taxable income you made, including income from Zelle, on your tax return.

Why doesn’t Zelle send you a 1099?

Zelle says it doesn’t have to send 1099-K forms because of a difference in how it processes payments. 

Zelle is owned by Early Warning Services, a financial technology company owned by large banks, including Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo.

Zelle is different from some competitors because it facilitates direct bank-to-bank transfers between customers. You can’t hold a balance directly on Zelle like you can on Venmo or PayPal. That difference translates to different reporting requirements^[0]

Long story short: Zelle’s setup, which uses direct bank-to-bank transactions, is not subject to the IRS’s 1099-K reporting rules. Other peer-to-peer payment apps are considered “third-party settlement organizations” and are bound by stricter tax rules^[0]

So, should you switch to Zelle? 

That depends on you and your needs. Zelle has its strengths, but you might also need some features Zelle doesn’t offer that are available from competitors such as Venmo, PayPal and Cash App.

For instance, some alternatives to Zelle offer the ability to buy investments such as stocks and crypto. If that’s something you’re looking for, you may want to shop around. Certain competitors also offer the ability to use credit cards in payments, which Zelle doesn’t support. 

Some of these other apps are also very widely used, so if your friend doesn’t have Zelle, you might have to download another app anyway to get your half of the pizza bill.

In Zelle’s favor is the absence of fees for sending and receiving money (though you should check with your bank to make sure it’s not charging you on its end). And the service’s close relationships with many banks may give comfort to people unfamiliar with digital payments. 

Finally, because Zelle isn’t required to send tax forms, it is also not required to do backup withholding for people who don’t supply tax information. This requirement can lead services such as Venmo to hang onto up to 24% of your payments until you confirm your identity.

Still, if you’re thinking about switching payment services just to avoid taxes, you may want to slow down. Again, if you have taxable income, you are supposed to pay taxes whether you get a form or not.