What Changed with the 1099-K Threshold
- Under the One, Big, Beautiful Bill (OBBB), thresholds for TPSOs (third-party settlement organizations) reverted to $20,000 in gross payments and more than 200 transactions for reporting goods or services. (irs.gov)
- Affected payees include marketplace sellers, gig economy workers, apps like rideshare or delivery platforms, and any third-party payment processors for goods/services. (irs.gov)
Compliance Requirements Going Forward
For Payment Settlement Platforms / TPSOs
- If you facilitate payments and meet the threshold, you must issue 1099-K to payees and file with the IRS.
- Ensure systems accurately capture both gross amounts and transaction counts. Even high gross with few transactions, or vice versa, matters. (irs.gov)
For Gig Workers / Online Sellers
- Report Form 1099-K income. Compare with totals from settling entities.
- Keep thorough records of business expenses, cost of goods sold, vehicle, supplies, home office if applicable—these offset gross receipts.
- If you receive Form 1099-K unexpectedly (or not at all), still report income correctly.
Digital Nomad / Cross-Border Considerations
- A U.S. citizen or resident abroad earning income via TPSOs may still receive 1099-K; foreign-source taxes and foreign tax credits may apply when taxed by other jurisdictions.
- Be mindful of foreign bank or payment platform statements; mismatches can trigger IRS notices.
Practical Example
- Example: A rideshare driver earned $22,000 over 210 trips via app. Under the new rule, the platform must issue 1099-K because it exceeds both $20,000 and 200 transactions.
- Counterexample: A seller made $25,000 through only 150 transactions—no 1099-K under the $20,000-and-200 test (unless card payments apply). Expenses still deductible.
Actionable Advice
- Sellers: Check your transaction count—not just gross volume. If approaching either limit, prepare accordingly.
- Platforms: Update merchant and user databases now to capture necessary data—transaction count, payee SSNs or ITINs.
- Consult a tax professional if in gray area—for example, mixed income sources or foreign sources.
Understanding the reinstated 1099-K threshold is crucial for financial planning and avoiding penalties. Proper recordkeeping and awareness will save time and stress.