1099-K Form Reporting Threshold Guidance Announced For Tax Year 2024 and Beyond

The IRS announced transition relief in reporting thresholds for third-party settlement organizations (TPSOs) set to take effect for the upcoming tax filing season. As a result of this transition relief, the TPSOs will not be required to report tax year 2024 transactions on a Form 1099-K to the IRS or the payee for the lower, over $600 threshold amount enacted as part of the American Rescue Plan of 2021. Well known third-party settlement organizations (TPSOs) include Venmo and PayPal. 

Per the IRS guidance, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in 2026 and after. This is as part of the phase in to implement the lower over $600 threshold enacted under the American Rescue Plan.

The American Rescue Plan of 2021 changed third party payment processors reporting requirements to include payments processed exceeding $600, which is down considerably from the original more than 200 transactions per year and exceeding an aggregate amount of $20,000 reporting requirement. This meant you would receive a Form 1099-K for payments processed for goods and services that exceed $600. The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill. TPSOs report these transactions by providing individual payee’s an IRS Form 1099-K, Payment Card and Third-Party Network Transactions.

The transition period announced delays the requirement to report third party transactions over $600 and processors will issue Form 1099-K to taxpayers who have more than $5,000 in payments processed by third parties in tax year 2024 (the taxes you file in 2025). The transition period is intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting. A participating payee, in the case of a third-party network transaction, is any person who accepts payment from a third-party settlement organization for a business transaction.

If you are a creator, influencer, freelancer, rideshare driver, work a side gig or other self-employed business and you accept credit, debit, or prepaid cards you may receive Form 1099-K, reporting self-employment payments processed by third party settlement organizations if you have  payments  exceeding $5,000 in 2024. 

If you are an online seller selling on platforms like Ebay, Airbnb, Etsy, and VRBO with sales of more than $5,000 you could also receive a form 1099-K even if you do occasional sales and consider it a hobby.

Note, some Third Party Settlement Organizations (TPSOs) may send you a Form 1099-K at lower amounts.

One thing to remember is if you are self-employed, you are always supposed to claim your self-employed income regardless of the amount and if your net income is $400 or more you are supposed to file a tax return reporting your self-employment income, since you need to pay self-employment taxes. Don’t worry about paying taxes on the entire amount reported on Form 1099-K.  You can claim your expenses directly related to your business, lowering your income reported on Form 1099-K.

TurboTax will be here to educate and guide taxpayers on what Form 1099-K is and what it means to their taxes. Taxpayers who receive Form 1099-K can get a jumpstart on their taxes with TurboTax by snapping a photo of your Form 1099-K, verifying their data, and their information will be pulled into the correct form. Whether an occasional online seller or self-employed TurboTax AI-driven expert platform provides you a done-for-you tax filing experience and connection to TurboTax Live Full Service tax experts specializing in self-employed and small business taxes, providing unparalleled ease, and fast access to money.