For four years, online sellers and gig workers braced for a new rule that would have required payment platforms to send a 1099-K for any account receiving more than $600 in a year. That rule was passed in 2021, delayed three times by the IRS, and finally killed for good by the One Big Beautiful Bill Act in 2025. The old $20,000 and 200-transaction threshold is back, and it is now permanent.
What Changed and Why It Matters
The $600 threshold was included in the American Rescue Plan Act of 2021. It would have required platforms like PayPal, Venmo, eBay, Etsy, Cash App, and Airbnb to send a 1099-K to virtually any user with more than $600 in goods and services payments in a year. The IRS delayed implementation repeatedly as platforms, tax preparers, and taxpayers raised concerns about the compliance burden and the number of mistakenly issued forms.
OBBBA closed the issue permanently by resetting the threshold to $20,000 and 200 transactions, the level that existed before 2021.
What Counts as Goods and Services Payments?
The threshold only applies to commercial transactions. Personal transfers such as splitting a dinner bill, paying a friend back, or receiving a gift do not count toward the $20,000 threshold and should not appear on a 1099-K.
Payment platforms allow users to tag transactions as either "goods and services" or "friends and family." When you sell an item, complete a freelance job, or receive payment for a service through PayPal, Venmo, or a similar platform, use the goods and services designation. This creates the correct paper trail and keeps personal transfers out of the reporting calculation.
If you receive a 1099-K that includes personal transfers, you can reconcile the discrepancy on your tax return by showing the non-taxable amounts. Keep records of which transactions were personal so you can document the adjustment.
Getting a 1099-K Does Not Mean You Owe Tax on All of It
This is the most common misconception. A 1099-K reports gross proceeds, not taxable profit.
If you sold used household items for less than you originally paid, those sales are not taxable income even if the gross amounts are reported on a 1099-K. If you are a reseller or freelancer, your taxable amount is gross revenue minus your actual expenses (cost of goods, platform fees, shipping, etc.).
Report all 1099-K amounts on your return and subtract allowable costs to arrive at taxable income. Ignoring a 1099-K you received is a fast way to trigger a CP2000 notice.
The Threshold Applies Per Platform, Not in Total
Each payment platform tracks transactions separately. If you receive $15,000 through Etsy and $15,000 through PayPal, neither platform sends you a 1099-K because neither individually exceeds $20,000. You still have $30,000 of potential taxable income to report on your return, but neither platform has a reporting obligation.
This is an important distinction. The absence of a 1099-K does not mean the income is not taxable. It just means the platform is not required to report it. The IRS still expects you to report all taxable income from all sources.
What Casual Sellers Should Know
If you sell old clothes on eBay, handmade goods on Etsy, or occasional furniture on Facebook Marketplace, you are unlikely to cross both thresholds ($20,000 AND 200 transactions) in a single year. Most casual sellers will not receive a 1099-K under the current rules.
That said, all taxable gains are still reportable even without a form. If you are buying and reselling items at a profit, that income belongs on Schedule C whether or not you reach the 1099-K threshold. Selling personal property at a loss is generally not deductible, but it is also not taxable income.
What Gig Workers and Freelancers Should Know
If you earn more than $20,000 through a single platform and complete more than 200 transactions, expect a 1099-K. Rideshare drivers, delivery workers, and online freelancers who use a single payment platform regularly are the most likely to cross both thresholds.
Track your business expenses throughout the year because your taxable income is net of those costs, not the gross amount on the form. Platforms report gross proceeds and will not subtract fees or business expenses for you. Common deductible expenses for gig workers include mileage, platform fees, supplies, and a portion of a cell phone used for business.
State Rules May Differ
Some states have their own 1099-K reporting thresholds that are lower than the federal $20,000 requirement. States like Maryland, Massachusetts, Vermont, and Virginia have adopted lower thresholds for in-state reporting purposes. Receiving a state 1099-K does not change how you calculate federal taxable income, but it is a signal that the state tax authority may match that amount to your state return.
Bottom Line
The $600 threshold saga is over. The 1099-K threshold is back at $20,000 and 200 transactions, permanently, under OBBBA. Casual online sellers have significant relief. Active gig workers and resellers who cross the thresholds will still receive forms and need to account for their income and expenses correctly.
Questions about how 1099-K income affects your return? Contact TS CPA for personalized guidance.