What Has Changed?
Under the One, Big, Beautiful Bill, the reporting requirement for Form 1099-K by third party settlement organizations (TPSOs) is retroactively reinstated to the threshold that was in place before the American Rescue Plan Act of 2021. That means: TPSOs must only file a 1099-K if both:
- Gross payments exceed $20,000, and
- Number of transactions to a payee exceeds 200 in a year. (irs.gov)
If only one of these conditions is met, 1099-K reporting is not required. The law is effective retroactively to the enactment of OBBB. (irs.gov)
Who It Affects
- Small business owners, freelancers, sellers using platforms like Etsy, PayPal, or credit-card settlement networks. Even moderate sales might trigger earlier 1099-K under old rules.
- Third party settlement organizations such as payment networks that collect and settle payments for goods/services. They are responsible for the 1099-K issuance.
- Tax preparers and platforms who need to adjust reporting systems and alert payees.
Compliance Checklist
| Step | What to Do |
|---|---|
| 1. Review transaction records | Look at gross annual payment amounts and number of transactions per payee, separately. |
| 2. Be alert to mixed cases | If payments exceed $20,000 but only 150 transactions, no 1099-K needed. If 250 transactions but total $15,000, no requirement. |
| 3. Update platform/payout system | Platforms that send payments should re-configure systems to trigger 1099-K only when both thresholds met. |
| 4. Educate users/payees | Let your sellers/costumers or partners know of reinstated limits so they can anticipate reporting. |
| 5. Retain documentation | Save data for number of transactions and amounts per payee in case of IRS inquiry. |
Example Scenarios
- Example A: Sally sells crafts via different platforms. She receives $35,000 total in payments from Platform X, with 180 sales. Since 180 < 200, no 1099-K needed from Platform X.
- Example B: Tom sells furniture, sells 250 items for total $15,000. Number of transactions >200 but total amount < $20,000 ⇒ no 1099-K issue.
- Example C: Rosa works as a driver for ride-share with 300 rides, but total payments from the settlement organization are $18,000. No Form 1099-K under reinstated rule.
- Example D: Leon sells graphic design, receives $25,000 in payments and 220 transactions. Both thresholds met, so 1099-K required.
Actionable Compliance Steps
- Inform your accountant or bookkeeping system of the reinstated thresholds.
- Platforms: revise internal triggers or report generation routines so they reflect the dual-threshold rule.
- Individuals: assess whether you might receive a 1099-K now, and what that means for how you report income.
- Keep detailed transaction counts per payee: date, amount, identity of payers, to distinguish by payee.
Penalties & Risk
Not issuing or not reporting when required can lead to penalties under information return requirements (Sections 6721, 6722). Inconsistent or incorrect 1099-Ks can trigger IRS audits or mismatches. Better to be safe by tracking thresholds accurately.
Wrap-up: The reversion to $20,000 & 200-transaction threshold under OBBB simplifies reporting for many small sellers, but demands vigilance. With dual-criteria in place, many previously burdened by low thresholds will see relief—but both thresholds must be met. Ensure your systems, documentation, and awareness reflect this reinstated standard.