October 31, 2025
The IRS has clarified how Form 1099-K reporting will work moving forward. In new guidance released October 23, 2025 (IR-2025-107 and FS-2025-08), the agency confirmed that under the One Big Beautiful Bill Act (OBBBA), third-party settlement organizations (TPSOs) such as PayPal, Venmo, and Etsy will once again use the $20,000 and 200-transaction threshold for reporting. The update reverses the lower $600 limit introduced by earlier law and applies retroactively to tax years beginning after December 31, 2021. The IRS also stated that platforms will not need to amend prior filings. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.
Form 1099-K is a record of payments that come through credit cards or online payment platforms. It gives the IRS a way to cross-check income that’s been reported with the payments actually received through these systems. The form itself doesn’t create a new tax bill, but the numbers shown should match what a business includes as income.
Two kinds of organizations send out Form 1099-K. One group is the merchant acquiring entities; this includes credit/debit card companies such as Visa, Mastercard, or Square. They’re required to report every card payment a business processes, no matter how small. The other group includes TPSOs like PayPal, Venmo, Etsy, or Airbnb. These platforms only issue a 1099-K when a seller’s payments go over $20,000 and there are more than 200 transactions during the year.
For example, a retail store that accepts credit cards will always have those payments reported on Form 1099-K by its card processor, even for a single $5 sale. An artist who sells crafts on PayPal or Etsy, though, won’t see a 1099-K unless yearly sales top $20,000 and involve more than 200 separate payments.
Personal payments made through TPSOs, such as reimbursements or shared expenses, aren’t included on Form 1099-K when they’re marked as non-business activity. Business owners who use payment apps should make sure accounts are set up for business use, so income is tracked correctly.
Most payment processors issue Form 1099-K by January 31 for the prior year. Taxpayers should review the form carefully and make sure the amounts shown reflect actual business income.
OBBBA restored the $20,000 and 200-transaction reporting threshold for Form 1099-K and applied it retroactively to tax years beginning after December 31, 2021. This ends years of changing federal thresholds and uncertainty for taxpayers and payment platforms.
The confusion began in 2021, when the American Rescue Plan Act (ARPA) lowered the reporting threshold to $600 for any number of transactions. The IRS postponed that change twice and kept the higher limit in place for 2022 and 2023, citing the need for a smoother rollout. Temporary transition amounts of $5,000 for 2024 and $2,500 for 2025 were then implemented. However, OBBBA resets the standard to where it was before ARPA and makes that rule permanent.
Payment platforms that issued Forms 1099-K under the lower threshold do not need to amend or withdraw them, and those that did not file under the ARPA rules will not face penalties.
Some states still use lower thresholds for Form 1099-K reporting. Businesses will want to check local requirements to ensure compliance.
Beginning in 2026, the reporting thresholds for Forms 1099-NEC and 1099-MISC will also increase from $600 to $2,000. These forms are used for direct business payments, such as fees to independent contractors.
Frequently Asked Questions
Do businesses need to report income if they do not receive a Form 1099-K?
Yes. Income from goods or services is taxable regardless of whether a Form 1099-K is issued. All income must still be reported when filing a tax return.
If Form 1099-K is issued for less than the $20,000 threshold, is IRS follow-up required?
No. Some payment platforms may issue Forms 1099-K below the federal threshold for recordkeeping. The taxpayer does not need to contact the IRS, but they should keep the form for tax records.
What steps should payment processors and platforms take now?
Payment processors and online platforms should confirm that systems align with the reinstated $20,000 and 200-transaction threshold. They should also stay informed about any state-level reporting requirements, which may be different from federal requirements.
Contact Us
The OBBBA changed the thresholds for Form 1099-K. By doing so, it removed years of confusion and restored a consistent reporting standard. Businesses and individuals should keep detailed records and confirm that payment platforms are set up correctly for business use. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.