Tax Planning
Maximizing Benefits: Planning Around the U.S. 1099-K Threshold Revert
The IRS has lowered the 1099-K reporting threshold to $20,000. If you’re receiving payments through third-party networks like PayPal or Venmo, this matters. Here's how to plan ahead.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What’s Changing
The IRS recently issued **Fact Sheet 2025-08**, confirming that for tax year 2025, the threshold for filing **Form 1099-K** under the One, Big, Beautiful Bill reverts to **$20,000** in gross payments and **200 transactions**. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai)) This means many hobbies, small-scale sellers, side hustles, or freelancers who didn’t meet the previous lower threshold might now surpass this amount and be required to report these payments.
## Who Must Report
If you act as a **third-party settlement organization** (TPSO), you need to file a 1099-K for users who receive over $20,000 in goods or services or transact over 200 times in a calendar year. All other similar organizations must issue those 1099-K’s accordingly. Individual taxpayers receiving those payments in excess are required to report them—even if they're paid via debit cards or digital networks.
## Planning Tips & Compliance Methods
- **Track income** closely. Maintain records of gross payments from platforms like eBay, Etsy, Venmo, PayPal, etc. Include fees and refunds.
- **Estimate early**. If mid-year gross payments plus projected future sales exceed $20,000, plan as though you’ll receive 1099-K and allocate for tax.
- **Separate personal vs business**. Using business accounts and formal invoicing helps establish legitimacy and organize expenses.
- **Deduct expenses diligently**. Only gross sales are reported at threshold; business deductions (shipping, materials, home-office) still reduce taxable income.
## Example Scenario
Sara runs an online boutique. In the first 8 months of 2025:
- $15,000 in sales through Etsy (130 transactions)
- $12,000 through Shopify (80 transactions)
Total: **$27,000 in gross payments and 210 transactions combined**
She will receive a 1099-K from the platform over Etsy or Shopify (or both depending on thresholds per platform), and must report these. But she can deduct cost of goods sold, shipping, packaging, and certain overhead when calculating her taxable income.
## Actionable Steps
1. Request a projection or report from your stores/platforms mid-year to see if you’ll get a 1099-K.
2. Keep business receipts and maintain proper bookkeeping software.
3. Consult a tax professional to estimate quarterly tax payments if needed.
4. If you anticipate being over the limit in advance, consider whether business structure (sole proprietor versus LLC, etc.) influences liability or advantages in your jurisdiction.
## Bottom Line
The reversion of Form 1099-K threshold to $20,000 and 200 transactions means more people—side hustlers, content creators, small business owners—may now meet the criteria for reporting. Stay organized, monitor your payments, and ensure you're ready to report. An ounce of preparation now can save penalties later.