What to Know About the New 1099-K Reporting Threshold

July 2025 update: 1099-K threshold increasedAfter the passage of the One Big Beautiful Bill (OBBB), the 1099-K reporting threshold has returned to $20,000 in payments and at least 200 transactions for the 2025 tax year and beyond. The lower $2,500 and $600 thresholds are no longer in effect for 2025 and 2026. See below for full details.

If you sell items online or use third-party payment apps like Venmo® or Cash App®, you’ve probably heard about several Internal Revenue Service (IRS) reporting threshold changes for Form 1099-K in the past few years. The IRS initially planned to lower the reporting threshold to $600 — first for 2022, then for 2023. In 2024, the IRS delayed the change again and pivoted to a phase-in implementation with the goal of lowering the threshold to $600 by 2026.

Unsurprisingly, these shifting rules have caused plenty of confusion for taxpayers. But with the passage of the OBBB, the IRS has now reverted the Form 1099-K reporting threshold to $20,000 in payments and at least 200 transactions for the 2025 tax year and beyond.

This article will break down what these threshold changes mean for your taxes, who may (or may not) receive a Form 1099-K for 2025, and what you need to know when filing your tax return.

Recap of the 1099-K reporting threshold changes

The IRS has changed the Form 1099-K reporting thresholds several times in recent years, which has understandably left many online sellers scratching their heads. Here’s how the thresholds have shifted:

For tax year 2023: You would only receive a Form 1099-K if your payments through third-party platforms (like PayPal®, Square®, Venmo®, etc.) totaled more than $20,000 and you had at least 200 transactions.

For tax year 2024: The IRS lowered the reporting threshold to $5,000, with no minimum number of transactions required.

Originally planned for 2025 and 2026: The IRS announced further drops to $2,500 for 2025 and eventually $600 for 2026, both with no transaction minimum. However, these lower thresholds have now been rolled back.

Current rule for 2025 and beyond: With the passage of the One Big Beautiful Bill, the 1099-K threshold has reverted to $20,000 in payments and at least 200 transactions for 2025 and future years.

If you meet the threshold for a given year, you’ll receive Form 1099-K from any payment app or online marketplace you used. This informational tax document reports the gross amount of your reportable transactions.

Form 1099-K FAQs

Why does the reporting threshold for Form 1099-K keep changing?

Congress has changed the reporting threshold for Form 1099-K several times in recent years. The American Rescue Plan in 2021 originally set a much lower threshold, aiming to catch more unreported income as side hustles and gig work became more common. However, after multiple delays and a lot of confusion, the OBBB rolled back these changes. For tax year 2025 and beyond, the threshold is back to $20,000 in payments and at least 200 transactions per year.

Will I need to pay tax on my transactions if I only use payment apps for personal payments?

Nope! The 1099-K reporting requirements are only meant for individuals who make money by selling goods or providing services using payment apps or online marketplaces. If you only use payment apps for personal reasons — like sending money to friends or family, splitting bills, or reimbursing someone — you don’t need to worry.

Tax Tip: Many apps offer a “friends and family” option to help keep personal transactions from being reported as business payments.

Will I get a 1099-K if I sell items via online marketplaces?

That depends on how much you sell, how many transactions you have, and which tax year we’re talking about. Here’s a quick breakdown:

• 2023: You would get a 1099-K if you received more than $20,000 and had at least 200 transactions.• 2024: The threshold dropped to $5,000 (no transaction minimum). • 2025 and later: The threshold is back to $20,000 and 200 transactions.

You only owe tax on profits, not on selling personal items at a loss. For example, if you sell your used laptop for less than you paid for it, you won’t owe tax on that sale.

Gifts, reimbursement, and selling personal items at a loss are excluded from income taxes. So, if you only use payment apps or online marketplaces for these reasons, you don’t need to worry about reporting those on your tax return!

What happens if a payment app sends me a 1099-K for a nontaxable transaction?

It’s possible to get a 1099-K for personal transactions or other nontaxable activity, especially if a payment app or marketplace can’t tell if a payment is personal or business-related. Receiving a 1099-K doesn’t automatically mean you owe taxes on those payments. You’re only taxed on actual profits or business income.

Self-employed people may also find they don’t need their 1099-K. Freelancers who use these apps as payment processors, for example, might get a 1099-K from the payment app as well as a 1099-NEC from their client for the same transaction. In this case, you won’t need to report the income twice.

The IRS expects you to separate personal from business payments and report only what’s actually taxable. To keep things simpler, try to keep your personal and business transactions clearly separated on your payment apps and avoid mixing the two when possible!

You can find more details on the IRS website.

Will this increase or decrease my taxes?

Not if you’ve been reporting your income correctly! The threshold changes only affect when a payment platform is required to send you a 1099-K — they don’t create new taxes or get rid of taxes. All income from selling goods or services has always been taxable, even before all the changes to 1099-K reporting thresholds.

If you’re new to selling online or gig work, it’s a good idea to check how much you’ve earned so you’re ready for tax time. If you’re selling items for a profit, our capital gains tax calculator might be of help.

How do I report my 1099-K transactions on my tax return?

• Selling personal items at a loss: You don’t typically report these since only profits are taxable.• Hobby income: Report on Schedule 1.• Capital gains (selling at a profit): Report on Schedule D.• Business/self-employment income: Report on Schedule C if you’re a sole proprietor, or use the business forms for your structure (Forms 1120, 1120-S, or 1065). You don’t need to stress about how to report your 1099-K transactions — TaxAct® walks you through the filing process step by step. Our tax software will help you determine whether you need to report your 1099-K transactions and ensure your income is entered in the right place. Just answer a few simple questions about your income, and we’ll take care of the rest.

Want more details? Check out our guide to Form 1099-K where we discuss how to use this form and how to file it with TaxAct.

Why did I get a 1099-K from my state?

Some states have their own rules for Form 1099-K reporting, and many state thresholds are much lower than the federal limit. While the IRS requires payment platforms to issue a 1099-K only if you have at least $20,000 in payments and 200 transactions for 2025, several states set their reporting threshold at just $600, no matter how many transactions you have.

If you live in one of these states or receive payments there, you could get a 1099-K even if you don’t meet the federal threshold. And just like with the federal form, receiving a 1099-K from your state doesn’t always mean you owe taxes. But you’ll still want to keep good records of what you sold and what counts as taxable income.

If you’re not sure what your state requires, check with your state tax agency or let TaxAct guide you when you file — we’ll ask the right questions to help you figure it all out.

How payment app users and online sellers can prepare for tax season

Still unsure how to prepare for reporting 1099-K transactions? Here are three key steps to help you accurately file your income tax return.

1. Practice good bookkeeping.

It doesn’t matter if you sold one item for profit or operated as a small business — keeping detailed records is essential for tax purposes.

The best thing you can do is save your receipts and keep organized documents of your transactions on every payment app you use. If you’re selling for business purposes, some of the most important records to keep track of include your cost of goods sold (usually what you originally paid for the item you are selling), shipping costs, fees, and any expenses for packing and shipping supplies. Be sure to keep track of any refunds paid to customers as well.

Tracking this information will help you determine your taxable income and prevent you from overreporting income which can result in an overpayment of income tax. Expenses like shipping and supply costs are generally deductible business expenses, so keep track of each item’s cost basis and the final sale price to determine the cost of goods sold. It’s also a good idea to take photos of the items you sold and place them with your records.

Organized, detailed records will help streamline your income tax return, whether you file on paper or use an online tax filing software like TaxAct.

How long should you hold onto receipts?

The IRS can typically audit tax returns filed within the last three years, so long as there is not a substantial error. Because of this, it is recommended that you keep receipts and other supporting documents for at least three years after filing your return or until the statute of limitations expires. This can vary depending on when you filed (or didn’t file) — if you’re unsure, it’s probably best to hold onto the receipts and consult a tax professional.

2. Make sure the payment platform has your TIN (SSN, EIN, or ITIN) on file.

When you registered for your payment platform account, you may not have provided your full taxpayer identification number (TIN). Your TIN can be your Social Security number (SSN), employer identification number (EIN), or individual taxpayer identification number (ITIN).

Once you reach the sale threshold — $20,000 and at least 200 transactions for 2025 — the payment platform will ask you to provide your TIN to comply with IRS reporting requirements.

Make sure to confirm that the information you provide to the third-party platform is accurate and matches what the IRS has on file for you or your business. If the TIN you provide does not match IRS records, the payment platform will require that you upload Form W-9 to correct your TIN.

In the absence of a valid TIN, the IRS requires third-party payment platforms to withhold 24% of your gross proceeds as backup withholding. If this happens, you may receive a Form 1099-K even if you did not hit the federal reporting threshold.

3. Know how to use your Form 1099-K.

The Form 1099-K you’ll receive is an informational document designed to help you file your income tax return.

When filing, it is best practice to compare Form 1099-K against your personal records to ensure all your transactions are accounted for. The amounts reported on your Form 1099-K are gross proceeds, not necessarily income. To determine the income associated with each transaction, you will need to determine the cost basis of the item(s) sold.

It’s also important to note that transactions included on your Form 1099-K are based on the transaction settlement date, not the sale date. For example, if you sold an item on Dec. 31, 2024, but the funds did not settle until Jan. 2, 2025, that transaction would show up on your Form 1099-K for 2025 instead.

How you report your 1099-K income depends on what you sell and whether you run a business. If you are a sole proprietor, you will report your business profits using Schedule C. If you are a consumer selling capital assets or selling as a hobby, you will report any profits and losses using either Schedule D or Schedule 1.

The bottom line

If this is starting to sound like a lot, don’t panic. Reporting income from your 1099-K as a first-timer is not nearly as daunting as it sounds. If you choose to file with TaxAct, our intuitive tax prep software will ask questions about items you sold and pull all the necessary tax forms for you to file.

Think of the Form 1099-K you receive as a guide designed to help you determine your taxable income. Keep good records, understand that only profits are taxable, and verify that the third-party platform has your TIN to prevent delays or complications with your online sales.

By following these essential steps, you’ll be setting yourself up to file your federal income tax return with confidence.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

All trademarks not owned by TaxAct, Inc. that appear on this website are the property of their respective owners, who are not affiliated with, connected to, or sponsored by or of TaxAct, Inc.

Source link