For the third consecutive year, the IRS has postponed full implementation of the $600 reporting threshold for Form 1099-K. There are changes to the reporting thresholds for 2024. Let’s dive in.

What is Form 1099-K and why does reporting keep getting delayed?

As we reported last December in our blog, IRS Postpones $600 1099-K Threshold for Another Year, Form 1099-K reports payments for goods or services made through third-party platforms like Venmo or PayPal, which businesses must include on their tax returns. The IRS has delayed the lowered $600 reporting threshold for the past 3 years, most recently November 2024.

What you need to know for 2024 reporting.

The IRS recently released guidance on 2024 reporting. Calendar year 2024 will be regarded as a transition year, but there is a phase-in for the reporting threshold. 1099-K reporting will be required for aggregate payments exceeding $5,000 for 2024, regardless of the number of transactions. Calendar year 2025 will be regarded as the final transition year, with a reporting threshold of $2,500, again regardless of the number of transactions. In 2026, the $600 reporting threshold is scheduled to be implemented.

What can you do now to prepare?

Receiving payments that are not business related? If you are receiving payments on payment apps that are not business related, such as birthday gifts, sharing the cost of a car ride or a reimbursement for household bills, make sure they are not coded as a purchase in the app when paid. If they are, contact the payment platform to correct the information so it won’t be reported on the 1099-K.

Receiving payments for personal items? If you receive payments for personal items whether sold at a loss or a gain, make sure to have documentation on the basis so you can offset the income received on the 1099-K.

What about business transactions? For business transactions, the best course is always to maintain good records to report all related expenses that should offset the income. As a copy of the 1099-K will be sent to the IRS using lower thresholds, smaller businesses may be on the IRS radar when they haven’t been in the past.

What is the most overlooked consideration when it comes to 1099-K reporting? Some states require that third-party platforms report payments to the state as well. Usually this would be based on the address of the recipient. Some states share information that is reported to the IRS and some require separate filings. Either way, income and related expenses will need to be reported on your state income tax return.