Form 1099-K Reporting Threshold Returns to $20,000 and 200 Transactions: What You Need to Know

If you sell products, provide services, or receive payments through online platforms like PayPal, Venmo, Shopify, Etsy, Ticketmaster, or Amazon, understanding Form 1099-K reporting requirements is essential. The One, Big, Beautiful Bill (OBBB) recently reinstated the original reporting threshold of $20,000 in gross payments and more than 200 transactions, reversing the lower $600 threshold introduced by the American Rescue Plan Act (ARPA) in 2021.

This change can significantly impact small business owners, online creators, and side hustlers. In this article, we’ll break down what it means for your business, walk through common scenarios, and provide practical steps to ensure compliance while minimizing tax liability.

What Is Form 1099-K?

Form 1099-K is an information return that payment settlement entities (PSEs) use to report certain payments to the IRS. Payments that trigger Form 1099-K reporting typically come from:

• Credit cards, debit cards, and stored-value cards (like gift cards)
• Payment apps or online marketplaces (Third Party Settlement Organizations, or TPSOs) for goods and services

Receiving a Form 1099-K does not automatically mean you owe more taxes. It simply reports gross payments received, which you will reconcile with your expenses and other records when filing your tax return.

What Changed Under the OBBB?

Under ARPA (2021), third-party platforms had to issue 1099-Ks for any payee receiving over $600, regardless of the number of transactions. This created confusion for small sellers and side hustlers who only had a few payments during the year.

The OBBB restored the previous threshold:

• Gross payments must exceed $20,000 and
• More than 200 transactions in the year

Only payees who meet both criteria are required to be reported by TPSOs.

Example:
If you are a Shopify store owner selling handmade candles in 2025 and received $18,000 across 150 orders, you will not receive a 1099-K under the OBBB rules because you did not exceed $20,000 and 200 transactions, even though you would have under ARPA’s $600 threshold.

Note: Some payment processors without a de minimis threshold, or those conducting backup withholding, may still issue a Form 1099-K even if you don’t meet these thresholds.

Who Needs to Be Concerned?

1. Online Sellers & E-Commerce Businesses

Creators, Shopify store owners, Amazon sellers, and online marketplace vendors may receive Forms 1099-K depending on transaction volume and payment amount.

Example:
If you are a TikTok merchandise store owner selling custom T-shirts, earning $25,000 from 300 Etsy orders, you will receive a 1099-K because both thresholds are exceeded.

Example:
If you are a freelance photographer occasionally selling prints online and earn $5,000 via PayPal, you will not receive a 1099-K, but this income is still taxable.

2. Freelancers and Service Providers

Payment apps like PayPal, Venmo, or Square can issue 1099-Ks for service income. Even if your payments are below $20,000 or 200 transactions, keeping accurate records is essential.

Example: If you are a freelance video editor on Fiverr and receive $12,000 from 180 transactions, no 1099-K will be issued, but this income must still be reported on Schedule C.

3. Doctors, Dentists, and High Net Worth Individuals

Medical professionals or high net worth individuals accepting payments through a payment app for consultations, workshops, or product sales may also receive 1099-Ks.

Example:
If you are a dentist selling branded dental kits online and earn $22,500 from 210 orders, you will receive a 1099-K.

How to Handle Form 1099-K Correctly

1. Separate Personal vs. Business Transactions

Reimbursements, gifts, and personal transfers should not be included in taxable income.

Example:
If you are a roommate who receives $1,500 in rent reimbursements via Venmo, this is not taxable. You can zero out this amount on Schedule 1 (Form 1040).

2. Determine Your Basis and Gain

For the sale of personal items, calculate the gain or loss:

Example:
If you are a concertgoer who sells tickets purchased for $500 for $900, the $400 gain is taxable; report it on Form 8949 and Schedule D.

Example:
If you sell a used refrigerator for $700 that you bought for $1,000, the $300 loss is not deductible, but you can still report the gross proceeds on Schedule 1.

3. Keep Detailed Records

Track:

• Payment dates and amounts
• Transaction types (goods, services, reimbursement)
• Platform fees or refunds (not included in gross payments)

4. Check for Errors or Multiple Forms

If you receive multiple 1099-Ks or notice an error on a form, contact the filing platform immediately. If a corrected form isn’t issued in time, report the transaction correctly on your tax return using Schedule 1.

Key Takeaways for Online Commerce

• Even if you don’t receive a 1099-K, all income is taxable unless explicitly exempt.
• Keep personal and business transactions separate to avoid reporting errors.
• Use gross payment amounts and reconcile with your actual sales, refunds, and expenses.
• Platforms may still issue a 1099-K below the federal threshold, depending on their own rules or state reporting requirements.

Velin & Associates, Inc. Can Help

Navigating Form 1099-K reporting and income recognition for online sales, freelance work, or e-commerce businesses can be complicated. At Velin & Associates, Inc., we specialize in helping:

• YouTubers, TikTokers, and content creators
• Shopify, Amazon, and e-commerce sellers
• Medical professionals and dentists
• High net worth individuals seeking strategic tax planning

We ensure all income is reported accurately, deductions are maximized, and your tax compliance is seamless.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

Let our experienced Los Angeles CPAs guide you through Form 1099-K compliance, e-commerce tax planning, and personal or business income reporting.

CPA for YouTubers | CPA for Shopify Store | CPA for Online Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | Online Commerce CPA | CPA for TikTokers | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals