Venmo users may not even notice the prompt to toggle yes or no if the payment is for a good or service. Some simply may not care enough to bother, and yet others may have agreed with the recipient of the funds to classify the transaction as personal.
Regardless of the motivation, it's very unlikely that a person making a payment is going to suffer any consequences for getting it wrong. The bar is high to show that the person buying a good or service has intentionally misclassified a transaction or knowingly violated the law, says Steve Rosenthal, a tax attorney and senior fellow at the Urban-Brookings Tax Policy Center.
Some side hustlers may decide they'd rather just deal in cash than have to face new reporting requirements, even if they're easy to dodge. But given the convenience of cashless payment apps, especially as people increasingly transact remotely, most will continue using them. For the government to get its legal share of that growing income category, it's going to have to plug a lot of holes in its rule. Maybe it should start by deciding who it's going to make accountable for compliance.
Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.