With the passing of the “One Big Beautiful Bill Act,” many taxpayers will see more tax deductions next year when filing their taxes, especially those who earn secondary income through third-party payment applications.
The Internal Revenue Service (IRS) announced on Thursday that they will revert back to the previous reporting threshold for the 1099-K form: taxpayers will now need to report if their annual transactions exceed $20,000 and the number of transactions exceeds 200.
The 1099-K form is applicable to individuals engaged in gig work or occasional online sales of goods. The form details the payment amounts taxpayers receive from selling goods and services. Statistics show that millions of Americans use third-party payment applications such as PayPal, Venmo, Cash App, Zelle, Google Pay, etc., to earn extra income online.
Prior to 2023, taxpayers were not required to report if their transactions were fewer than 200 in a year and their total income did not exceed $20,000; crossing this threshold would trigger the issuance of a 1099-K tax form. Simultaneously, third-party payment platforms are also obligated to report users’ annual individual income to the IRS.
However, under the “American Rescue Plan” (ARP) passed by the Biden administration in 2021, the reporting threshold for the 1099-K form was lowered to $600, aimed at combatting tax evasion by taxpayers failing to report income.
The IRS has emphasized multiple times that the ARP regulation targets only transactions related to goods and services, excluding everyday user transactions such as ride-sharing, dining expenses, gift purchases, or family bill payments. Yet, this regulation has sparked protests from third-party platforms and taxpayers, who believe it will impact individuals earning extra income through online sales, renting properties, or working on digital platforms.
In order to allow for a smoother transition, the IRS has repeatedly delayed the implementation of the new regulation, subsequently introducing a phased implementation plan: setting the income threshold at $5,000 for 2024, $2,500 for 2025; starting in 2026, the strict $600 requirement will be fully enforced.
On July 4th of this year, President Trump signed the “One Big Beautiful Bill Act,” overturning the income threshold for 1099-K set during the Biden administration. In other words, third-party platforms are now “not required to submit a 1099-K form unless the total transactions paid to the payee exceed $20,000 and transactions exceed 200.” However, at the state government level, some states may have stricter income reporting thresholds.
Nevertheless, the IRS stated in their documentation: “All income—regardless of amount—is taxable income as long as it is not explicitly excluded by tax law. This includes income not reported on any tax forms, such as cash rewards, property, or services received.”
If taxpayers mistakenly receive a 1099-K form they should not have received, the IRS recommends promptly contacting the provider (such as the payment platform) to request the correct form.
Translation contributed by Naveen Athrappully from the English Epoch Times. ◇