There's a new 1099-K threshold: What you should know if you get paid via Venmo, Cash App or PayPal

Yahoo

2 days ago

Millions of Americans who sell goods online or use third-party platforms such as PayPal, Cash App or Venmo will soon face new tax reporting rules under changes introduced by the One Big Beautiful Bill Act.
The bill, signed into law by President Donald Trump on July 4, brings sweeping tax policy reforms, including a reversal of previously planned 1099-K reporting thresholds.
'The changes will offer much-needed relief for casual sellers and small business owners who use platforms like PayPal, Venmo and Etsy,' says Ella Rivkin, CEO of ERPS Group, an accounting firm in New York City.
Prior to the new tax law, the IRS was set to lower the reporting threshold to $600 starting in 2026. That would have dramatically increased the number of taxpayers receiving Form 1099-K. The new law reverses that plan, offering relief to millions.
Learn more: Trump's temporary tax breaks: 5 'big beautiful bill' provisions that may not stick around for long
Here's how the new 1099-K rules work
Under the 'big, beautiful bill,' the 1099-K reporting threshold reverts to $20,000 in payments and 200 transactions in a calendar year, effective for 2025 and beyond. This means fewer taxpayers will receive the forms — a welcome change for those who use platforms like PayPal or Venmo for occasional sales or personal transfers.
'By reinstating the $20,000 and 200-transaction threshold for reporting, the law eliminates confusion and reporting requirements for individuals who occasionally sell personal items,' Rivkin says.
The updated rules also eliminate confusion caused by the American Rescue Plan Act, which had lowered the threshold to $600 beginning in 2026. To give third-party settlement organizations more time to comply with the 1099-K reporting requirements, the IRS announced in 2024 a phased-in approach to the reporting rules.
Here's a snapshot of the rules before and after the 'big, beautiful' tax law:
1099-K reporting thresholds
Before the 'big beautiful bill'
Current law
2023 and earlier
$20,000+ and more than 200 transactions
$20,000+ and more than 200 transactions
2024
$5,000+
$5,000+
2025
$2,500+
$20,000+ and more than 200 transactions
2026
$600+
$20,000+ and more than 200 transactions
'For the 2024 tax year, the IRS will continue using a $5,000 threshold, which was implemented as a transitional measure away from the $600 rule,' Rivkin says. 'Taxpayers should be aware of the differences in reporting rules for 2024 and 2025.'
The new law applies beginning with the 2025 calendar year, which means the updated 1099-K thresholds will apply to tax returns filed in 2026. Companies must issue Form 1099-K by January 31 of the following year.
Learn more: If you're a fan of sports betting or casino gambling, you won't be a fan of the new tax law
Zelle is an exception
While most platforms are required to follow 1099-K reporting requirements, Zelle doesn't fall within that category.
'The Zelle platform directly transfers funds from one bank account to another, similar to a wire transfer,' says Monica Houston, a certified public accountant in Brentwood, Calif.
'Because Zelle never has custody of the funds — it simply moves money — it is not subject to 1099-K reporting requirements,' she says.
Learn more: How to use Zelle: A beginner's guide to digital payments
Who is likely to receive a 1099-K?
Form 1099-K is issued to taxpayers who receive payments for selling goods or providing services through third-party networks. Even if you don't meet the threshold, you may still receive a form, and you are still responsible for reporting all taxable income.
Payments received for personal reasons — such as gifts or reimbursements for shared expenses — are not considered taxable and should not be reported on a 1099-K. If you receive a 1099-K in error, contact the issuer and request a corrected version with the erroneous amounts removed.
Houston recommends having a clear accounting system to distinguish between personal and business transactions. 'I recommend using an Excel spreadsheet or QuickBooks Online to organize your records,' she says. 'A solid accounting system will help ensure you report income accurately on your tax return.'
Learn more: 2025 federal tax brackets and income tax rates
How to report 1099-K income on your tax return
Form 1099-K can reflect various types of payments, which affect how you report the income on your tax return:
Personal sales: If you sell personal items at a loss (e.g., used furniture or electronics), the loss is not deductible, but the income can be excluded. If you make a profit, that amount — less your cost — is taxable.
Business income: Freelancers, gig workers and other self-employed individuals should report income on Schedule C.
Rental income: If you receive rent payments, report them on Schedule E.
Learn more: Estimated tax payments: How much you need to pay, and when
Rivkin emphasizes that taxpayers are still responsible for reporting taxable income, even if they don't receive a 1099-K.
'Don't assume everything on a 1099-K is taxable, and don't assume something isn't just because you didn't get a form,' she says. 'If you're reselling personal items at a loss or reimbursing a friend, those are not typically taxable events. Keep good records and consult a tax professional if you're unsure.'
Learn more: 5 states with the highest income tax rates— and 5 with the lowest