The Internal Revenue Service (IRS) has released new guidance clarifying the Form 1099-K reporting threshold under the One Big Beautiful Bill (OBBB). The update, published in Fact Sheet 2025-08, reinstates the previous reporting limits that were in place before the American Rescue Plan Act of 2021 (ARPA).
Under the reinstated rules, third-party settlement organizations (TPSOs) such as payment apps and online marketplaces will only be required to file Form 1099-K when gross payments to a single payee exceed $20,000 and the number of transactions exceeds 200 in a calendar year.
What Form 1099-K Reports
Form 1099-K is an IRS information return used to report payments received for goods or services through payment cards or third-party settlement entities. It’s designed to improve tax compliance by helping taxpayers accurately report income received through electronic payment platforms.
The form applies to two primary categories of payments:
- Payment card transactions: Credit cards, debit cards, and stored-value cards such as gift cards.
- Third-party payment apps and marketplaces (TPSOs): Platforms such as PayPal, Venmo, and Etsy when used for business transactions.
Even small amounts processed through payment cards are reportable. There is no minimum threshold for payment card transactions—meaning a Form 1099-K must be filed for any amount, even as low as one cent.
By contrast, TPSO-reported payments are only reportable once both the $20,000 gross payment and 200-transaction thresholds are met.
Why the Change Matters
The ARPA of 2021 had lowered the 1099-K reporting threshold dramatically to just $600, regardless of the number of transactions. That change prompted concerns from small businesses, gig workers, and casual online sellers who would have been required to report relatively small volumes of activity.
The One Big Beautiful Bill reverses that change, restoring the higher pre-2021 threshold. This rollback is retroactive, meaning third-party settlement organizations will follow the old standard for the current tax year.
IRS Guidance and Compliance Notes
According to the IRS, information reporting by payment processors helps reduce the tax gap—the difference between taxes owed and taxes collected—by improving voluntary compliance and data accuracy.
Taxpayers receiving a Form 1099-K should use it alongside other financial records to determine total taxable income. Receiving the form does not necessarily mean all payments are taxable; only income derived from sales or services must be reported.
The IRS advises taxpayers to consult its publication Understanding Your Form 1099-K for detailed instructions on how to interpret and reconcile the form with their records.
It’s also important to note that state thresholds may differ. Some states require TPSOs to issue a Form 1099-K even when federal thresholds are not met.
Key Takeaways for Businesses and Individuals
- New threshold reinstated: $20,000 in total payments and more than 200 transactions for TPSO reporting.
- No threshold for card payments: Any amount from credit, debit, or gift card transactions must be reported.
- Retroactive application: The higher threshold applies for the current tax year.
- Action required: Taxpayers should review their income records carefully and confirm whether they will receive a Form 1099-K from any platform or payment processor.
