The One Big Beautiful Bill (OBBB) rolls back a major change in IRS reporting rules for payment apps and other third-party settlement networks—such as PayPal, Venmo, Cash App, eBay, and Etsy—making tax reporting less burdensome for many taxpayers.
If you’ve been worried about getting a Form 1099-K for every side gig or personal sale over $600, this update is good news.
The Old Rules: $600 Threshold
Under the American Rescue Plan Act of 2021, starting in 2022, payment platforms were supposed to send a Form 1099-K to anyone receiving over $600 in total payments in a year, regardless of the number of transactions.
That $600 rule dramatically expanded reporting requirements—affecting even people selling used personal items at a loss. Implementation was delayed twice, but without a law change, it was set to fully take effect.
The New OBBB Rules: Back to $20,000 and 200 Transactions
The OBBB restores the pre-2022 thresholds for Form 1099-K reporting:
|
Aspect |
Pre-OBBB Rules |
Post-OBBB Updates |
Key Changes |
|
Form 1099-K Reporting Threshold |
$600, no minimum transaction count |
$20,000 and 200 transactions |
Restores pre-2022 thresholds, reducing the number of Forms 1099-K issued. |
|
Backup Withholding |
Applied to all reportable payments if TIN was missing |
Applies only if $20,000 and 200 transactions thresholds are met |
Aligns backup withholding rules with updated reporting thresholds. |
|
Effective Date |
Thresholds effective from 2022 under ARPA |
Changes effective for calendar years beginning after Dec. 31, 2024 |
Delays new thresholds until 2025. |
What This Means for You
- Fewer 1099-K Forms: Most casual sellers and small side-hustles won’t hit both the $20,000 and 200-transaction requirements, meaning fewer IRS forms arriving in your mailbox.
- Backup Withholding Narrowed: Platforms will only apply backup withholding if you meet the $20,000 and 200-transaction thresholds and fail to provide a taxpayer identification number (TIN).
- Effective 2025: These changes apply for transactions in calendar years starting after December 31, 2024—meaning your 2025 transactions will follow the new rules.
Key Points to Remember
- This Does Not Change the Taxability of Income
- Even if you don’t get a Form 1099-K, you’re still required to report taxable income from sales, services, or side gigs.
- Selling personal items at a loss is generally not taxable, but you should keep records to prove it.
- Business Owners Still Need Accurate Records
- Payment platforms only see part of your financial picture. Your books should track all income and expenses for accurate tax reporting.
- Casual Sellers Get Relief
- The $600 threshold would have generated millions of extra tax forms, many for transactions with no taxable income. The OBBB effectively removes this administrative headache for most casual sellers.
Example Scenarios
- Casual Seller: You sell used furniture on Facebook Marketplace for $3,000 over five transactions in 2025.
- Old Rule: Would have triggered a 1099-K at $600+ total.
- New Rule: No 1099-K because you don’t hit $20,000 and 200 transactions.
- Small Business Owner: You process $35,000 in payments over 250 transactions in 2025 via PayPal for your craft business.
- You’ll still receive a Form 1099-K and need to report the income.
Final Takeaway
The OBBB restores practical reporting thresholds for digital payments, focusing IRS reporting on larger-scale sellers and businesses while sparing casual users unnecessary forms. But remember—income is still taxable, and keeping good records is the best way to stay compliant.
Want help understanding how the OBBB’s changes impact your business or side income?
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