The $600 tax rule is gone. The One Big Beautiful Bill Act, signed into law on July 4, 2025, retroactively repealed the American Rescue Plan Act provision that would have required payment apps like PayPal, Venmo, and Cash App to send you a Form 1099-K for as little as $600 in payments.1Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill The federal reporting threshold has reverted to the pre-2022 rule: more than $20,000 in gross payments and more than 200 transactions in a calendar year. Getting a 1099-K and owing tax are two different things, though, and the repeal does not change what you owe on income you actually earned.
What Changed and When
Before 2022, third-party payment platforms only had to issue a Form 1099-K when a user crossed both $20,000 in gross payments and 200 transactions in a year. The American Rescue Plan Act of 2021 dropped that to $600 with no minimum transaction count, meant to capture more taxable income moving through apps used by gig workers, online sellers, and freelancers.2United States Committee on Ways and Means. The One, Big, Beautiful Bill Eliminates Democrats’ Onerous IRS Reporting Requirement for Third-Party Apps, Gig Workers
The $600 threshold never took effect. The IRS delayed it twice. For the 2023 tax year, the original $20,000/200-transaction threshold remained in place. For the 2024 tax year, the IRS applied a $5,000 transitional threshold. Then the One Big Beautiful Bill Act wiped the ARPA change out entirely, as if the $600 threshold had never been enacted.1Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill
The Threshold That Applies Now
A third-party settlement organization must file a Form 1099-K for a payee only when both conditions are met in a calendar year: the gross amount of reportable transactions exceeds $20,000, and the total number of transactions exceeds 200.3Office of the Law Revision Counsel. 26 USC 6050W – Returns Relating to Payments Made in Settlement of Payment Card and Third Party Network Transactions Both prongs are required. If you receive $25,000 through Venmo across 150 transactions, the platform is not required to send you a 1099-K.
The dollar figure is gross, meaning the total volume before fees, refunds, or adjustments. A seller who takes in $21,000 across 250 transactions but nets $18,000 after platform fees and shipping will still see $21,000 in Box 1a.
You may still get a 1099-K below the federal threshold. Some platforms issue the form voluntarily at lower amounts, and several states set their own reporting thresholds lower than the federal floor. If you live in one of those states, a platform may send you a form to comply with state law even though federal law would not require one.
A 1099-K Is Not a Tax Bill
This is the point most people miss. Form 1099-K reports gross transaction volume that moved through a payment platform. It does not measure taxable income. Box 1a routinely includes personal reimbursements, gifts between friends, and proceeds from selling used household items at a loss. The IRS knows this and provides a specific way to zero out the non-taxable portion on your return.
The reverse also matters. All income is taxable whether or not a 1099-K is issued. If you earn $8,000 freelancing through Venmo and never cross the reporting threshold, that income is still reportable.4Internal Revenue Service. Manage Taxes for Your Gig Work The repeal changed reporting, not taxability.
Which Payments Are Taxable
Whether a transaction on a 1099-K is taxable depends on what the payment was for.
Payments That Count as Income
Any payment for goods or services at a profit is taxable. Rideshare driving, selling handmade goods, freelance work, or any side business run through a payment app produces taxable income. Business expenses like platform fees, supplies, cost of goods sold, and mileage can offset that income on Schedule C, but the platform reports gross receipts.
Hobby income is also taxable. If you sell things or provide services without a profit motive, whatever you take in is still reportable.5Internal Revenue Service. Know the Difference Between a Hobby and a Business The catch: hobby expenses are not deductible. The provision that once allowed deducting hobby expenses up to hobby income was suspended by the Tax Cuts and Jobs Act and permanently eliminated by the One Big Beautiful Bill Act.6Internal Revenue Service. One, Big, Beautiful Bill Provisions Earn $2,000 from a hobby, spend $1,500 on materials, and you still owe tax on the full $2,000.
Selling a personal item for more than you paid for it is a capital gain, reported on Form 8949 and Schedule D. One year or less of ownership is short-term (taxed as ordinary income); more than one year is long-term (taxed at lower capital gains rates).7Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets
Gig and freelance income also triggers self-employment tax when net earnings reach $400 or more, covering Social Security and Medicare.4Internal Revenue Service. Manage Taxes for Your Gig Work The combined rate is 15.3% on net earnings, calculated on Schedule SE. Half of the self-employment tax is deductible as an adjustment to income. Hobby income does not trigger self-employment tax because a hobby is not a trade or business.
Payments That Are Not Income
Personal reimbursements are not income. Splitting a dinner bill, paying someone back for concert tickets, or repaying a personal loan through Venmo are transfers of existing money. Gifts sent through payment apps are not taxable to the recipient either.8Internal Revenue Service. Gifts and Inheritances
Selling a personal item for less than you paid is not taxable. A couch bought for $1,200 and sold for $400 is a loss, and losses on personal property are not deductible. The $400 is not income. But if the sale ran through a payment app and the total lands you on a 1099-K, you will need to zero out that amount on your return to avoid a tax bill on money you never actually earned.
Using the “friends and family” or “personal” designation for non-business transactions helps document the nature of the payment. It does not guarantee the transaction stays off a 1099-K, but it creates a paper trail. Keep original purchase receipts for items you sell and notes on reimbursements.
How to Report It
Where the income goes depends on what generated it.
- Business or self-employment income belongs on Schedule C, where you also deduct platform fees, supplies, mileage, and cost of goods sold.9Internal Revenue Service. What to Do with Form 1099-K
- Hobby income goes on Schedule 1 (Form 1040), Part I, Line 8z, described as “Form 1099-K Hobby Income.” No expenses are deductible.
- Capital gains from personal items sold at a profit go on Form 8949 and Schedule D.7Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets
When a 1099-K includes non-taxable amounts, the IRS expects you to enter the full Box 1a figure and then subtract the non-taxable portion. Report the gross amount on Schedule 1, Part I, Line 8z. Enter the non-taxable portion on Schedule 1, Part II, Line 24z with a description such as “Form 1099-K Personal Item Sold at a Loss.” The two entries cancel out.10Internal Revenue Service. Form 1099-K FAQs – What to Do if You Receive a Form 1099-K
If your 1099-K shows $7,000 in Box 1a and $5,000 of that was reimbursements and items sold below cost, you would put $7,000 on Line 8z and $5,000 on Line 24z. You are taxed only on the remaining $2,000.
If the 1099-K Is Wrong
Payment platforms sometimes report the wrong amount, include transactions that belonged to someone else, or send a form that should not have been issued at all. Contact the issuer immediately; the name and phone number sit in the upper left corner of the form.11Internal Revenue Service. Actions to Take if a Form 1099-K Is Received in Error or with Incorrect Information Keep every piece of correspondence.
If the platform will not issue a corrected form, do not delay filing. The IRS cannot correct a 1099-K for you, but you can neutralize the error the same way you neutralize non-taxable amounts. Enter the erroneous amount on Schedule 1, Part I, Line 8z as “Form 1099-K received in error,” and enter the same amount on Part II, Line 24z with the same description. Net effect: zero.10Internal Revenue Service. Form 1099-K FAQs – What to Do if You Receive a Form 1099-K
Freelancers sometimes receive both a 1099-K and a 1099-NEC for the same payment when a client pays through a platform and also reports the payment directly. Report the income once and use your own records to reconcile.
What Happens if the Numbers Do Not Match
The IRS receives a copy of every 1099-K a platform files, and its Automated Underreporter system compares those forms against what shows up on your return. A mismatch can produce a Notice CP2000.12Internal Revenue Service. Topic No. 652 – Notice of Underreported Income CP2000
A CP2000 is a proposal, not a bill. It says the IRS found 1099-K income that does not appear on your return and lays out the additional tax it thinks you owe. You have 30 days to respond, or 60 days if you live outside the United States. Agree, and you sign and pay. Disagree, and you explain in writing with documentation such as receipts showing a personal item was sold at a loss or records proving a payment was a reimbursement.12Internal Revenue Service. Topic No. 652 – Notice of Underreported Income CP2000
Ignoring the notice leads to a Statutory Notice of Deficiency, the formal step before the IRS assesses the tax and starts collection. Contesting the amount at that point means petitioning the Tax Court. Responding to the CP2000, even in disagreement, is the far cheaper path.
The IRS can audit returns up to three years after filing, and six years if it suspects a substantial understatement of income. Keep your original purchase receipts, transaction memos, business expense records, and correspondence with platforms at least that long.