Compliance
Navigating Form 1099-K & Employee Retention Credit Rules: New FAQs Under OBBB
Under the One, Big, Beautiful Bill, the IRS issued updated FAQs covering changes to 1099-K thresholds and limitations on Employee Retention Credits—essential for gig workers and businesses with past ERC claims.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## What Changed Under OBBB for 1099-K & ERC?
The OBBB altered key tax reporting rules. The IRS released **Fact Sheet 2025-08** on October 23, 2025 for Form 1099-K changes and **Fact Sheet 2025-07** on October 22 for Employee Retention Credit (ERC) compliance limitations. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
- **1099-K Threshold Reversion**: The dollar threshold for filing Form 1099-K now **reverts** to **$20,000** (and 200 transactions), replacing the lower thresholds previously in place. This applies to third-party payment networks. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
- **ERC Limitations**: For third and fourth quarters of 2021, ERC claims filed *after* January 31, 2024 are limited in both credit amounts and refunds. The FAQs explain exactly what’s allowable and how you appeal denials. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
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## Impacts for Different Taxpayers
| Group | What To Watch |
|-------|----------------|
| Gig workers & sellers | Need to monitor payment processing reports; avoid surprise 1099-K reporting if payments stay under $20,000 or 200 transactions. If over, keep full records and classify income correctly. |
| Small businesses with past ERC claims | Review all claims for Q3 & Q4 2021 made after Jan 31, 2024, ensure appeal options are known; maintain documentation. |
| Tax preparers & platforms | Adjust tax software or reporting systems to align with the restored 1099-K thresholds; inform clients about what’s required. |
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## Action Plan Before Filing Season
1. **Map your transactions**: For those receiving payments via third-party networks (e.g. online marketplaces or apps), sum the dollar amount and number of transactions across 2025.
2. **Document tip or ERC eligibility**: Ensure you keep clear records of wages, tips, eligibility for credits, and emails or forms proving your earnings or claims.
3. **Understand penalty risks**: Under the OBBB, certain reporting failures or late filings (especially with ERC or 1099-K) can draw penalties. Use the threshold change or filing deadlines to ensure compliance. |
4. **Stay current on FAQs and notices**: The IRS continues issuing guidance—platforms, businesses, and gig workers should monitor IRS FB4-08 and FB4-07. |
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## Real-World Example
**Scenario**: Alex sells crafts via an online platform and got $22,500 from 250 sales in 2025 through that platform. Under the new 1099-K rule, Alex will now get a Form 1099-K. Alex should track payments and possibly adjust estimated taxes and report that income correctly.
**Scenario**: Teresa claimed ERC for Q4 2021 in mid-2024 and sought refunds. Under the new rules, because her claim was after Jan 31, 2024, she must check whether her filing date triggers limitations and whether there’s available appeals process as described in the FAQs.
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## Bottom-Line Advice
If you’re in any of these groups, update your accounting to reflect the restored 1099-K threshold and eligibility rules. Evaluate past ERC claims and prepare appeal strategies. Consulting with a tax pro can make a difference when crossing thresholds or dealing with complex claims.
**source**: IRS News Releases IR-2025-107, IR-2025-106 (Oct 22-23, 2025) ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))