Online sellers and freelancers in the United States have found changes in 1099-K reporting thresholds over the past few years to be a headache at best, but recent IRS policy changes will bring relief to many.
Congress enacted a rule changing the 1099-K threshold for 2025 taxes, which means you should only receive a Form 1099-K if the total payments you received on a third-party network or payment app exceed $20,000 and you made more than 200 transactions on a single platform during the tax year (1).
This is great news for those who have a side hustle, like driving an Uber or selling random items online. This threshold should ensure that only those who are serious about selling goods or services through third-party platforms are responsible for the additional tax paperwork and similarly have their profits properly taxed.
Here’s the backstory on the confusion surrounding Form 1099-K, and why if you want to make some extra money on the side, you can now sit back and relax without having to worry about an extra tax form.
Initially, the “$600 Rule” regulations changed the requirements for Form 1099-K, which meant that all taxpayers who earned $600 or more on platforms like PayPal, Venmo, or Cash App had to fill out an additional form and pay taxes on that income. However, to mitigate the impact on these third-party companies and taxpayers, the IRS announced a 2024 tax threshold of $5,000 as a way to “phase in” the $600 threshold(2).
This has caused confusion for many people over the past few tax seasons, with many taxpayers receiving Form 1099-Ks that they were not expecting.
The National Taxpayers Union Foundation (NTUF) lobbied hard against the changes, arguing that a significant drop in reporting thresholds would lead to confusion in forms and reporting, and could also trigger a tax on things like accepting transfers from friends, where taxpayers would have to report higher income than they actually earned.
“The 1099-K course correction is a victory for transparency, simplicity, and common sense,” wrote NTUF Vice President of Research Demian Brady (3).
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This IRS tax form reports payments received through third-party networks or payment applications. In fact, it helps the IRS track the income you earn from running a business, including online sales and gig work.
Business owners who accept credit cards, debit cards, gift cards, or other electronic payments from customers need Form 1099-K to accurately report their business income (4). However, casual sellers (including sellers selling personal items through online marketplaces) should not receive a 1099-K form from the third-party payment platform they use.
Form 1099-K was originally issued in 2011. Before the American Rescue Plan Act of 2021 lowered the threshold and removed the transaction volume requirement, the limit was $20,000 in revenue and 200 transactions on at least one platform(5). The One Beautiful Act reverses changes from the 2021 bill that many experts are calling a return to common sense.
Changes in the tax law bring some relief to Americans looking to make extra money by doing odd jobs or selling personal belongings online for cash.
If you have a thriving online business, you’re probably already familiar with Form 1099-K and know the thresholds that must be passed before you’re asked to fill out the form. The platform you use should issue Form 1099-K for your 2025 taxes by January 31, 2026.
If you are a temporary seller, remember that even though you don’t have to fill out a 1099-K form, income is income and you should report it. The money you make from online sales will be added to your regular income for the year.
If your minimum income from online sales is less than $20,000 and you have no other forms of income, you do not need to file Form 1099-K, but you should file your taxes anyway because you may be eligible for a tax refund due to your low-income status (5).
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Internal Revenue Service (1); Kiplinger (2); National Taxpayers Union Foundation (3); Turbo Tax (4); (5)
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.