What Changed with Form 1099-K under OBBB
As of July 4, 2025, the OBBB Act retroactively reinstated the Form 1099-K reporting threshold that existed before the American Rescue Plan Act (ARPA). Now, third-party settlement organizations must issue a Form 1099-K only if gross payments exceed $20,000 AND there are more than 200 transactions per payee. (irs.gov) This reverses the lower threshold of $600 regardless of transactions count under ARPA. (irs.gov)
Who Needs to Comply and What to Watch Out For
| Stakeholder | What They Must Do | Key Risks |
|---|---|---|
| Individuals / side hustlers | Track income via payment apps, note whether Form 1099-K arrives; report all taxable income regardless of whether a Form is received. | Surprises if threshold hit unexpectedly; missing deductions or reporting mistakes. |
| Platforms / TPSOs | Issue Forms 1099-K only when both thresholds met; provide informational resources. | Penalties for incorrect forms; confusion over gross vs. net payments; state rules may differ. |
| Tax professionals | Advise clients on income reporting; help clients verify income even without 1099-K. | Underreporting risk, audit exposure; clients may misclassify personal vs business income. |
Actionable Steps to Ensure Compliance
- Maintain detailed transaction logs through your payment platforms and bank statements. Don’t rely only on Forms 1099-K arriving.
- If you occasionally sell items online, check if you separately collect reports or annual summaries to reconstruct income.
- If you’re a small business or saver selling goods, separate business vs personal sales, track cost basis (what you paid for materials) to compute gains properly.
- When dealing with contracts or payments, understand gross payments include the full amount before fees, refunds, or returns. These are separately deductible if properly documented.
Compliance Example
Lia sells handmade crafts on Etsy. In 2025 she receives $21,000 in gross payments over 210 transactions in a calendar year. Under OBBB’s reinstated rules, she will get a Form 1099-K because both thresholds are exceeded. She must report as income, but she has business expenses such as materials ($5,000), shipping ($2,000), and platform fees ($1,500), which she can deduct. Even without the 1099-K, she should keep these records and report accurately.
On the other hand, Michael has 250 transactions but only $18,000 in gross payments. He won’t receive a 1099-K due to not meeting the dollar threshold, though he still must report income if taxable.
Recommended Best Practices
- Check the date of transactions: since the threshold rule is retroactive under OBBB, ensure 2025 activity evaluated properly.
- Use accounting or tracking software if you have many transactions across platforms.
- Consult a tax professional especially where you have mixed personal and business use or when gross income is close to threshold.
Bottom Line
While the reinstated threshold eases the burden for many low-volume sellers, compliance still matters. Always report taxable income, keep solid records, and be proactive about understanding platform reporting behavior. With better planning, you can avoid common pitfalls.