The IRS was phasing in a lower threshold for reporting payments received through PayPal, Venmo, eBay, or similar apps.  However, the One Big Beautiful Bill Act (OBBBA), reversed the phase-in and reinstated the reporting thresholds to 2023 and prior levels.  However, companies can still issue Forms 1099-K for lower amounts, so we’ll explain what to do if you do receive 1099-K forms.

What is Form 1099-K and what are the thresholds going forward?

Form 1099-K reports payments for goods or services processed through third-party platforms such as PayPal, Venmo, or Etsy. Originally set at $20,000 and 200 transactions, the IRS planned to lower the threshold to $600 as part of the American Rescue Plan.

However, due to confusion and pushback from taxpayers and industry groups, the IRS delayed this lower threshold and now, the OBBBA reversed it to the original 2023 levels.

• 2024: Form 1099-K required for payments over $5,000, regardless of transaction count.
• 2025 and forward: Threshold is $20,000 or 200 transactions.

Please note, if you receive payments from credit cards, there is no minimum threshold, and you should receive Form 1099-K for any payments received. 

If you're using payment platforms for personal or business reasons, these thresholds determine whether you’ll receive a 1099-K and what the IRS will see.

How should individuals prepare?

Even if your activities are personal in nature, you could mistakenly trigger a 1099-K. In addition, third party filers may still issue 1099-Ks at the lower thresholds as they were prepared to do that.  Here are some tips to avoid confusion:

For personal payments:

• Avoid miscoding: If you receive money for birthday gifts, group dinners, or splitting bills, make sure the sender does not mark it as a purchase.
• Fix mistakes quickly: If miscategorized, contact the payment platform to correct the transaction.

For selling personal items:

• Track your basis: Selling an old couch or used laptop? If you sell at a loss, it isn’t taxable.  Regardless, you should be ready to show the original purchase price to offset the income.
• Document everything: Keep records of the original purchase to back up your tax filing.

What should businesses do?

If you receive payments for goods or services and may receive a Form 1099-K:

• Maintain clear records of all income received.
• Track all business expenses to reduce taxable income.
• Be aware of visibility: Small businesses that previously flew under the radar may now be flagged by the IRS if they receive Form 1099-K.
• Note – even if payments are not reported on a Form 1099-K, if they represent taxable income, you still need to report them on your tax return.  Any fees and related costs should be shown to offset the income. 

Do states also require 1099-K reporting? 

Yes, and this is a commonly overlooked issue.

• Some states require third-party platforms to report separately, while others share information with the IRS.
• Requirements vary based on your state of residence.
• State tax returns may require the third party payor report income on Form 1099-K, even if the IRS doesn’t.

If you live in a state that requires its own 1099-K reporting, make sure to check with your tax advisor or accountant.

Why Is This Important?

The recent reversal of the $600 Form 1099-K threshold may sound like a technical update, but it has very real implications for anyone who uses PayPal, Venmo, eBay, Etsy, or similar platforms. Whether you’re casually selling personal items or running a small business, understanding the rules now can help you avoid unnecessary tax notices, incorrect income reporting, and stressful cleanup later.

Here’s why this change matters:

• You may still receive a Form 1099-K even when it isn’t required.
  Many payment platforms built their systems around the previously planned $600 threshold. As a result, some may continue issuing forms for lower amounts, which could create confusion at tax time.
• The IRS sees what’s reported, whether it’s accurate or not.
  If a transaction is misclassified (for example, a friend marks a reimbursement as a “purchase”), the IRS may treat it as taxable income. Fixing these errors is possible but requires proactive steps.
• Businesses face increased visibility.
  Even though the threshold is reverting to $20,000/200 transactions, more small businesses will be issued Forms 1099-K than before the IRS began tightening reporting. That makes accurate record-keeping even more important.
• State rules may differ from federal rules.
  Several states have their own reporting thresholds and may issue 1099-Ks even if the IRS doesn’t require one.
• Mistakes can lead to incorrect tax bills.
  A Form 1099-K issued for non-business activity, or without proper documentation of expenses, can result in the IRS asking you to prove income you didn’t actually earn.

In short: even though the IRS reversed the $600 requirement, taxpayers shouldn’t assume the issue has disappeared. Knowing how platforms classify payments, keeping documentation, and understanding when the IRS expects reporting can save you time, frustration, and potentially money.