Latest IRS Update: 1099-K Reporting Thresholds for 2025 and Beyond
The IRS Is Changing 1099K Reporting: Here’s What You Need to Know
If you’re a freelancer, small business owner, side hustler, or even just someone who makes online transactions, the IRS has new tax rules that you need to be aware of. These aren’t just small tweaks—they’re big changes that could impact how you report your income and manage your taxes.
What’s Changing with 1099K Reporting?
The IRS is lowering the threshold for when payment processors—like PayPal, Venmo, Cash App, and Shopify—must send out a 1099K form.
Here’s the timeline of changes:
- 2024: The threshold drops to $5,000 (from $20,000).
- 2025: It lowers further to $2,500.
- 2026: It reaches just $600.
This means that if you receive more than these amounts in transactions from customers or sales, you’ll get a 1099K form—and so will the IRS.
Why Does This Matter?
Before, most people didn’t get 1099K forms unless they made over $20,000. But now, with these lower thresholds, a lot more people will be affected.
If you get paid through platforms like PayPal, Venmo, or Cash App, these platforms will report your total earnings to the IRS. Even if you only made a few thousand dollars, the IRS will know about it.
This means you’ll need to be extra careful about reporting your income correctly on your tax return. If the income you report doesn’t match the total reported on your 1099K forms, you could receive an IRS notice—or worse, face penalties.
What If You Don’t Hit the Threshold?
Even if you receive less than these amounts, you could still get a 1099K form. Why?
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Some states already require platforms to send 1099Ks for transactions over $600.
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Payment processors might issue a form even if they’re not required to.
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System errors or processing delays could still result in a 1099K being sent to you.
Regardless of why you get it, you cannot ignore a 1099K. The IRS will expect that income to be reported, even if you weren’t technically required to pay taxes on it.
What Happens in 2025 and Beyond?
In 2025, the reporting threshold lowers again to $2,500. That means even smaller transactions will be tracked by the IRS.
Then, in 2026, the biggest change hits: The threshold drops all the way down to just $600. This means almost any significant online transaction—whether from freelancing, side gigs, selling used items, or even garage sales—could trigger a 1099K.
If you’ve been making extra money on the side, this could come as a surprise. The IRS is phasing these changes in to get people used to reporting all their income, even from small sales.
What Can You Do to Prepare?
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Keep Good Records – Track your sales, payments, and expenses carefully. Keep receipts, invoices, and proof of personal transactions that aren’t taxable.
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Understand What’s Taxable – If you’re selling personal items for less than you paid, that’s usually not taxable—but you may still receive a 1099K and need to explain it.
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Match Your Reported Income – Make sure your tax return includes the income reported on any 1099K forms to avoid IRS notices.
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Work with a Tax Professional – If you’re unsure about how to handle this, getting expert help can save you time and stress.
What If You Get a 1099K for Non-Business Transactions?
Sometimes, a 1099K might include personal transactions—like paying a friend back for dinner or receiving money from family. These aren’t taxable, but they could still show up on your tax forms.
If this happens, you’ll need to carefully report it on your tax return as non-taxable income, which can get complicated. That’s why it’s so important to keep clear records of what’s business income and what’s personal.
Final Thoughts
These IRS changes are going to affect a lot of people. Whether you’re a freelancer, small business owner, or just someone making a little extra money online, it’s important to stay informed.
Don’t let these changes catch you off guard. Start preparing now to avoid any surprises when tax season rolls around. If you have questions, leave a comment below! Also, check out my 1099K YouTube Playlist for more helpful videos.
If this article helped you, share it with someone who needs to know about these tax updates. And if you want to stay updated, make sure to subscribe to my YouTube channel for more tax tips. Thanks for reading!
