Everybody hears “PayPal is reporting to tax man in 2025 once you hit $600.”
Some people panic: “Does this mean if I send ₦50k to my cousin using Friends & Family, IRS will tax me?”
No. Chill.
There’s a big difference between Friends & Family (FNF) and Goods & Services (GNS). One is just you moving money around personally. The other is business. Taxes only chase one of them.
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The Two Structures: FNF vs GNS
Let’s break it down like jollof rice:
Friends & Family (FNF)
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Purpose: Sending personal money.
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Example: You borrow your guy ₦20k, he sends it back via PayPal.
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Fees: Free if using balance/bank in same country. Card or international adds small fee.
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Protection: None. If he scams you, PayPal won’t refund.
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Taxes: Not reported. It’s not income, just personal transfer.
Goods & Services (GNS)
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Purpose: Selling products/services.
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Example: You design a logo, client pays you.
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Fees: Seller pays percentage + flat fee.
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Protection: Buyer protected, seller maybe (mostly for physical goods).
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Taxes: Reported once you hit $600 total in 2025.
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The 2025 Tax Threshold Rule
Here’s the update:
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In 2025, PayPal (and similar platforms like Cash App, Venmo, Stripe) will send a 1099-K form to US taxpayers who receive $600 or more in a year through Goods & Services.
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Before, the threshold was $20,000 + 200 transactions. That was high as most small freelancers never crossed it.
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Now, just $600 triggers reporting. That’s like one decent freelance gig.
Why Friends & Family Is NOT Taxed
The IRS only cares about income.
If you’re just sending money to family, it’s not income.
Example:
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You send your sister in the US $200 for her birthday → not taxable.
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Your client pays you $200 for a website design via GNS → taxable.
PayPal separates these two streams. Only GNS payments count toward the $600 threshold.
But Wait, Some People Misuse FNF
Some freelancers think: “Aha! Let me tell clients to pay me via FNF so I dodge taxes.”
Problem:
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If PayPal suspects business payments are disguised as FNF, they can limit your account.
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You also lose Buyer/Seller Protection.
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If client files dispute, you’re finished.
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Real-Life Scenarios
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Tola the Copywriter: Earns $2,000 via PayPal GNS in 2025. Gets 1099-K. Must report it on US taxes.
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Chinedu the Student: Sends $100 FNF monthly to his cousin abroad. Not reported, no taxes.
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Amara the Designer: Tells US clients to pay via FNF. One client disputes. PayPal sides with client. She loses $350. Lesson learned.
Nigerian Freelancer Angle
For Nigerians, the tax reporting isn’t about IRS — it’s about access.
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PayPal restricts accounts.
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FNF payments can get you limited if abused.
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GNS funds often get held for 180 days.
So whether FNF or GNS, the real battle is withdrawal. And that’s where Exswap comes in.
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How to Stay Safe in 2025
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If you’re in the US:
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Report income from GNS once you pass $600.
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Don’t try to disguise business as FNF. Risky.
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If you’re outside the US (Nigeria, Kenya, Ghana etc.):
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IRS rules may not apply directly, but PayPal’s internal systems still care.
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Stick to clean transactions.
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Use Exswap to cash out before PayPal freezes you.
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Alternatives If PayPal Stresses You
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Payoneer: Freelancers’ favorite.
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Wise: Smooth for global payouts.
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Cash App/Zelle: US-focused.
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Gift Cards: Still popular.
FAQs
Q: Will Friends & Family payments be taxed in 2025?
A: No. Only Goods & Services count toward the $600 threshold.
Q: What if I receive both FNF and GNS?
A: Only GNS totals matter for tax reporting.
Q: Can I switch a payment from GNS to FNF later?
A: No. Once client pays under GNS, it’s logged that way.
Q: Is it safe to ask clients to use FNF?
A: No. You lose protection and risk account limitation.
Final Word
The 2025 tax threshold is not here to punish personal transfers. It’s about making sure freelancers and businesses report their income.
So:
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Friends & Family (FNF): Personal, untaxed.
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Goods & Services (GNS): Business, reported once you hit $600.
If you’re in the US, stay clean with your taxes. If you’re in Nigeria, the bigger fight is getting your money out of PayPal in the first place. That’s what Exswap solves.
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Don’t confuse FNF with GNS or you’ll end up losing both your money and your account.