New 1099-K Reporting Rules December 2024 UPDATE: What Freelancers, Side Hustlers, and Small Business Owners Need to Know

If you're a freelancer, small business owner, or side hustler—or anyone using payment apps—you need to pay attention. The IRS has made big changes to how they track your income in 2024, and these changes could mean a much bigger tax headache when filing your taxes.

No one likes surprises at tax time, so let’s make sure you’re prepared. Here’s everything you need to know about the new 1099-K reporting rules, what’s changing, how it affects your 2024 tax filing, and the steps you need to take right now to avoid any issues.

Trust me, if you’re using services like PayPal, Venmo, or Cash App, you don’t want to miss this. So grab a pen and take some notes! By the end of this, you’ll be ready to tackle these changes and file your taxes with confidence.

What’s Changing for 2024?

The IRS has lowered the threshold for payment processors like PayPal, Venmo, and Cash App. If you receive over $5,000 in total payments from customers or sales through these platforms, you’ll get a 1099-K form—and the IRS will know about your earnings.

Before, the threshold was $20,000 and 200 transactions. That’s a big difference! Now, if you hit just $5,000 in total payments, you’ll get a 1099-K, no matter how many transactions you’ve made.

This matters because if the IRS knows about it, you need to report it on your tax return. Even if you’re just selling old items on eBay, you still need to report it to avoid any issues. The IRS assumes all unreported amounts are taxable unless proven otherwise.

A Sneak Peek at 2025

Here’s the kicker: starting in 2025, the threshold will drop even further to just $600. That’s right—$600! This will affect even more people, especially those with smaller side hustles or occasional income.

While it’s not something you need to worry about this year, it’s definitely something to keep on your radar for next year. Oh, and by the way, Zelle isn’t subject to 1099-K reporting because it’s treated more like a bank—at least for now.

Who Needs to Pay Attention?

The short answer: anyone who gets paid through payment apps like PayPal, Venmo, or Cash App and receives over $5,000 in total payments for the year.

It doesn’t matter if the payments come from one big job or a bunch of smaller ones. If the total exceeds $5,000, you’ll likely get a 1099-K.

Here’s another thing: it’s not just about one client or customer. The $5,000 is the total from all transactions on each payment platform. So, if you’re working with several clients, it can add up quickly.

Tax Implications of a 1099-K

Receiving a 1099-K doesn’t automatically mean all the income is taxable. For example:

• Payments for goods or services? Taxable.
• Gifts or reimbursements? Not taxable.

However, you still need to report everything on your taxes to avoid red flags with the IRS. Keeping detailed records of what’s taxable and what’s not will save you a lot of stress.

Steps to Prepare Right Now

1. Track Your Payments
   Keep an eye on your total payments through PayPal, Venmo, and Cash App. It’s easy for side hustle earnings to sneak up on you.

2. Organize Your Records
   Go through your transactions and keep everything organized. Knowing where your income comes from will make tax time a lot easier.

3. Double-Check Your 1099-K
   When you get the form, compare the reported amount with your records. If there’s an error, contact the payment processor right away.

4. Don’t Wait Until Tax Season
   Get ahead of this now! The earlier you organize your records, the less stress you’ll have when it’s time to file.

5. Consult a Professional
   If this all feels overwhelming, reach out to a tax professional. They can help you navigate everything and make sure you’re filing correctly.
   
   

Final Thoughts

These new 1099-K rules might feel like a lot, but staying proactive and organized will save you from headaches later. Track your payments, verify your forms, and report everything accurately.

Need more help? Check out my step-by-step guide on reporting 1099-K income. It’s packed with practical examples to make the process easier. If you have questions about 1099-K, leave a comment in my YouTube Video, I’d love to help.

Thanks for reading, and good luck this tax season!