Compliance
Compliance Essentials: IR-2025-107 on 1099-K Threshold Reversion
The IRS has rolled back the controversial low reporting threshold for third-party settlement organizations—be clear when and how you need to report income under the old versus new rules.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## What Triggered This Change?
On **October 23, 2025**, the IRS issued *Fact Sheet 2025-08* explaining that the reporting threshold for Form 1099-K under the One, Big, Beautiful Bill (OBBB) now **reverts** to its pre-American Rescue Plan (ARPA) levels: payments must exceed **$20,000** *and* there must be more than **200 transactions** to require Form 1099-K reporting. ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) This change applies retroactively, aligning with long-standing thresholds many sellers already knew.
## Who Is Impacted?
This shift most affects:
- **Online marketplace sellers** who receive payments via platforms (Etsy, Upwork, etc.), especially the full-time and sideline gig economy
- **Digital content creators**—streams, courses, art sales—often paid via third-party settlement organizations (TPSOs)
- **Freelancers** who accept payment apps as clients’ preferred method of payment
If you received payments over multiple platforms, combined gross amounts matter—both for whether TPSOs generate 1099-Ks and how income is taxed.
## Breakdown: Old, New, and Future Thresholds
| Period | Threshold Criteria |
|--------|---------------------|
| **Before OBBB (pre-July 4, 2025)** | Over $20,000 **and** more than 200 transactions ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) |
| **Under ARPA twilight** | Attempted earlier lower thresholds (e.g. $600) but later delays and relief applied ([irs.gov](https://www.irs.gov/newsroom/irs-provides-transition-relief-for-third-party-settlement-organizations-form-1099-k-threshold-is-5000-for-calendar-year-2024?utm_source=openai)) |
| **2025-2026** | Reverted to $20,000 & 200 transactions ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) |
| **2026 onwards (statutory)** | $600 regardless of transaction count—as required by law after phase-in ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) |
## Practical Compliance Tips
1. **Monitor cumulative earnings across platforms**: Even if each platform pays under $20,000, combined amounts could trigger reporting in 2026.
2. **Maintain transaction records**: Keep full counts—dates, amounts, payment method—because both amount and number matter.
3. **Watch for 2026 changes**: The statutory threshold drops to $600 regardless of number of transactions—so plan ahead.
4. **Tax withholding and backup withholding**: Note that penalties may apply for TPSOs failing to withhold in certain years—stay compliant with Notice 2024-85 and related IRS guidance. ([irs.gov](https://www.irs.gov/newsroom/irs-provides-transition-relief-for-third-party-settlement-organizations-form-1099-k-threshold-is-5000-for-calendar-year-2024?utm_source=openai))
5. **Include income whether or not you get a 1099-K**: The IRS mandates reporting all income—even if you don’t receive form. Missing forms don’t excuse omissions.
## Example Situations
- **Case A**: Alex sells handmade goods on two platforms. In 2024, she gets $11,000 from Etsy and $10,000 from Shopify with over 250 transactions total. **No 1099-K** issued in 2024 because threshold was $5,000 & both amount & transactions matter. ([irs.gov](https://www.irs.gov/newsroom/irs-provides-transition-relief-for-third-party-settlement-organizations-form-1099-k-threshold-is-5000-for-calendar-year-2024?utm_source=openai)) In 2025, with the reverted threshold, it also drops back. But in 2026, $600 threshold means **expect** forms from platforms under that limit.
- **Case B**: Brooke streams digital art and receives direct payments via PayPal and credit cards—regardless of platform threshold, income must be reported on Schedule C. Form 1099-K may or may not show—but doesn’t change reporting responsibility.
## Why This Matters for Taxpayers
This reversion reduces reporting burden for many sellers and TPSOs in the near-term. However, for 2026 and beyond, with dramatically lowered limits, informal economy participants and side hustlers will need to prepare for far-increased scrutiny. Being caught unaware could lead to missed filings, overlooking deductions, or misreporting income.
Stay on top of communications from your payment platforms, and consult a tax professional if you’re unsure how the evolving rules apply to your income sources—especially in international or cross-border contexts.