If you receive money through online payment apps and use Form 1099-K to report your income, you should know the changes to the Form. Recently, the government changed the Form 1099-K threshold with the OBBA bill to $20,000. The article covers everything you wish to know about the $20,000 rule for the upcoming tax season.
Form 1099-K reports the income received from selling goods or services during the tax year from payment apps, online marketplaces, or credit or debit cards. The platforms file form to the IRS and send a copy to the recipients, too.
The form helps taxpayers figure out their taxable income for the tax year. Over the years, the threshold and rules of the form have been changing, that have confused the taxpayers or filers.
What’s the IRS change for Form 1099-K?
The One Big Beautiful Bill brings several tax changes, and one of them is setting the higher threshold for the Form 1099-K for the tax year 2025. Previously, the platforms had to file the Form 1099-K if the user received $600 or more, with no provision on the number of transactions.
The threshold for the form has shifted many times over the years, but now the new threshold is set for the online marketplace or platforms. So, if you received money for goods or services sold, you will receive the Form if you meet the following conditions:
- If the transaction for goods or services is over $20,000, you will receive the Form, and that platform and marketplace will report your income to the IRS.
- You have more than 200 transactions on one platform in the tax year.
How does the $20,000 new rule make taxes easier?
The government has set the 200/$20,000 rules for the Form 1099-K this year, let’s see how it made things easier for the taxpayers and platforms:
- Before the change, the platforms needed to file the Form 1099-K for $600 transactions and copy it to the recipients. This increases the paperwork for taxpayers, especially when the payment is not that high.
- The higher Form 1099-K threshold will clear the confusion that taxpayers usually have about the taxes they owe through goods and services sales.
- With fewer tax forms, taxpayers can avoid double taxation or miscalculation of the taxes.
- The IRS burden will also be reduced, as with the $600 rule, the density of the form was higher, but now with a higher threshold, the IRS can work efficiently.
- Freelancers, gig-workers, and small business owners can avoid the tax paperwork for small payments and calculate their taxable income.
When will you receive the Form 1099-K?
According to IRS guidelines, the payment apps, online marketplaces, and payment card companies need to file Form 1099-K to the IRS for each recipient per calendar year. The filers also send a copy to you by 31 January of the following year.
So, for the 2026 tax season, you will receive the Form 1099-K from the platforms or others by 31 January 2026 if you meet the form threshold and the number of transactions limit. Remember, even if you do not receive the Form 1099-K and you earned income through goods and services sales, you should still report the income on your tax return.
What should you do to prepare for the tax return with Form 1099-K changes?
If you are a taxpayer and received the Form 1099-K or sell goods or services, you must know how you should prepare for the tax return:
- Receiving the Form 1099-K does not mean you will be liable to pay taxes, unless your calculated taxable income crosses the threshold. The Form means your received payment is reported to the agency by the platform or payment company.
- You should keep records of your business, or work of selling goods or services, and payments you received through online payment methods, to use them later.
- When you receive your Form 1099-K, you should match the records with the details mentioned in the form to ensure it is recorded well, as sometimes the platforms mistakenly forget to remove the refunds or fees.
- If you do not understand the Form 1099-K, or do not understand how to use it, you can take a tax professional to navigate through your tax return.
Taxpayers receiving payment through online payment methods for goods or services should know they will only receive the form if the payment is over $20,000, and later use the form in filing tax returns.
Disclaimer: This information covers the IRS $20,000 rule update. Always confirm details and procedures through official IRS sources.
