The tax world just flipped upside down. Again. If you’ve been sweating about that $600 rule for your Venmo sales or eBay side hustle, take a breath. Things changed fast in mid-2025, and honestly, most of the "guides" out there are already outdated because they were written before the One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025.
Basically, the IRS was supposed to start breathing down your neck for every penny over $600. That’s dead. For now, anyway.
If you’re a gig worker, a casual seller, or someone who just sells a few old couches on Facebook Marketplace, the irs payment apps reporting threshold 2025 is likely a lot higher than you think. But there’s a catch. There is always a catch when the government is involved. Just because you don't get a form in the mail doesn't mean the money is "tax-free."
The $20,000 Comeback: What’s Actually Happening?
For years, the threshold to get a Form 1099-K was $20,000 and 200 transactions. Then, the American Rescue Plan Act of 2021 tried to slash that to a mere $600. It caused absolute chaos. The IRS delayed it, then they tried to "phase it in" with a $5,000 threshold for 2024 and a $2,500 threshold for 2025.
Then came the OBBBA.
This new law effectively nuked the $600 threshold. It retroactively reinstated the old-school rules. So, for the 2025 tax year (the taxes you’ll actually file in early 2026), the federal reporting threshold is back to **$20,000 and 200 transactions**.
You read that right.
If you sell $19,000 worth of vintage sneakers on an app but only have 150 sales, the app isn't required to send a 1099-K to the IRS. If you have 500 sales but only make $5,000 total? Still no form. You have to clear both hurdles—the dollar amount and the transaction count—before the "automatic snitch" system kicks in.
Wait, Why Did I Still Get a Form?
This is where people get tripped up. Just because the IRS says an app doesn't have to send a form unless you hit $20,000, it doesn't mean the app won't send one anyway.
Some platforms—think Stripe or certain ticket resellers—have already updated their systems for the lower limits and might just keep them there because it’s easier for their legal teams. Also, state laws are a whole different beast. If you live in a state like Massachusetts, Vermont, or Maryland, your local government might have a much lower threshold (sometimes as low as $600) regardless of what happens at the federal level.
If you get a 1099-K for $800, you can't just ignore it because "the federal law changed." If the IRS gets a copy, they expect to see those numbers on your return.
The "Friends and Family" Trap
Let's talk about the Venmo button. You know the one—where it asks if you're paying for "Goods and Services."
If you’re splitting a pizza or paying your roommate for half the electricity bill, make sure you aren't clicking that business button. The irs payment apps reporting threshold 2025 only applies to "reportable payment transactions." Personal reimbursements and gifts aren't taxable.
However, if you're a hairstylist taking payments via a personal Venmo account to "avoid the tax," you're playing a dangerous game. The apps are getting better at spotting business patterns. If you're receiving dozens of payments for "hair" or "deposit" every Friday, the platform might freeze your account until you provide a Taxpayer Identification Number (TIN).
Real Talk: Taxable vs. Reportable
This is the nuance most people miss.
- Reportable: The threshold at which an app (the Third-Party Settlement Organization) is legally forced to tell the IRS about your money.
- Taxable: Any profit you make.
If you bought a laptop for $1,200 and sold it on eBay for $800, you have $0 in taxable income. That’s a loss. Even if you got a 1099-K for that $800, you wouldn't owe tax on it—you’d just have to explain the "basis" (what you originally paid) on your tax forms to show the IRS why there’s no profit.
On the flip side, if you're a freelance graphic designer and you make $15,000 in a year through CashApp, you won't get a 1099-K under the 2025 rules. But—and this is a big but—you still legally owe taxes on that $15,000.
Backup Withholding is the Real Villain
The OBBBA might have raised the reporting threshold, but it didn't kill backup withholding.
If you haven't provided your Social Security Number or EIN to the payment app, and you start moving significant money, they are required to "backup withhold" 24% of your gross payments. They send that money straight to the IRS before you ever touch it.
It’s a massive headache. You’ll eventually get that money back as a credit when you file your taxes, but in the meantime, your cash flow is dead.
Actionable Steps for the 2025 Tax Year
Don't wait until January 2026 to figure this out. The rules are stable for now, but your record-keeping probably isn't.
1. Clean up your apps. Go through your Venmo, PayPal, and Zelle settings. If you have a business profile for a side gig you no longer do, shut it down. If you’re using a personal account for business, stop. It makes the accounting a nightmare and increases the risk of a "personal" gift being flagged as business income.
2. Document your "Basis." If you are a casual seller, start a simple spreadsheet. List the item, what you paid for it (the basis), and what you sold it for. If you ever get a surprise 1099-K for selling your old collection of 90s band tees, you’ll need those receipts to prove you didn't actually make a "profit" in the eyes of the law.
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3. Check your state's specific threshold. Don't assume your state follows the $20,000 federal rule. Check your state's Department of Revenue website. Some states haven't updated their laws to match the OBBBA yet, meaning you might still get a state-level tax form for a relatively small amount of money.
4. Provide your TIN early. Even if you don't expect to hit $20,000, give the platforms your tax info. It prevents the 24% backup withholding trap. It’s much better to have the app know who you are than to have them hold your money hostage for six months.
The 2025 tax season is going to be a lot quieter for most people thanks to the threshold reversal, but the IRS is still focused on the "shadow economy." Keeping your business and personal transactions separate is the single best way to stay off their radar.
Stay organized, keep your receipts, and remember that the "no form" rule isn't a "no tax" rule.