1099-K Thresholds: Big Reversal Under OBBB
Under the One, Big, Beautiful Bill (OBBB), the IRS has retroactively reinstated the reporting rules for Form 1099-K that were in place prior to the American Rescue Plan Act of 2021. This means that third party settlement organizations (TPSOs) must report payments only if:
- The gross amount exceeds $20,000, and
- There are more than 200 transactions to the same payee.
For smaller sellers, gig workers, or side hustlers, this may mean you’ll avoid the flood of 1099-K forms you expected.(irs.gov)
What This Means for Sellers and Platforms
- Selling online? If your annual $ value is below $20,000, or you have fewer than 200 transactions, you likely won’t receive a 1099-K just because you use multiple platforms.
- Gig and service income: Even if no 1099-K is issued, you must still report all income earned. IRS doesn’t require 1099-K-income only for withholding, but for reporting on your tax returns.
- Platform operators now have compliance relief: less burden unless both thresholds are met. But be aware of state law differences.
Actionable Tips to Stay Compliant
- Track all your payments and transactions, even small ones. You’ll need them for your own income reporting—especially if tax software or IRS notices probe “unreported income”.
- Retain records of costs, buyer info, and platform statements. This helps establish basis and document your profit.
- If multiple platforms are used, aggregate transaction counts per platform, not combined across all. The rule is threshold per platform.
Example Scenarios
- Maria sells handmade jewelry online 150 times a year through an app, making $25,000. Since 150 transactions <200, no 1099-K required.
- James is a ride-share driver, with 250 transactions earning $15,000. Though he has many transactions, the gross payment is less than $20,000—still below threshold.
- Linda sells custom woodwork: 300 transactions totaling $22,000. Both thresholds exceeded—she’ll receive a 1099-K. She should prepare by tracking costs and properly reporting income.
Why It Matters Now
- Low earners can breathe a sigh of relief—less paperwork, more clarity.
- The retroactive nature means 2025 is subject, so your 2025 online sales may trigger or avoid 1099-K depending on your totals.
- Software and platforms are updating their reporting systems—don’t assume past rules still apply.
TL;DR
Form 1099-K won’t cross your tray unless you hit both the $20,000 and 200 transactions mark under the post-OBBB law. But for all income, big and small, record everything—your tax return depends on it.
Category: Compliance