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The IRS just announced important updates regarding 1099-K reporting thresholds for third-party payment platforms like Venmo, PayPal, CashApp, and similar online marketplaces. These changes affect businesses, gig workers, and anyone who receives payments through these platforms, so let’s break it down into simple terms.
What’s Changing?
Here’s the scoop on the IRS’s timeline for reporting:
2024: Payment platforms will issue 1099-K forms for anyone who receives more than $5,000 in total payments.
2025: The threshold drops significantly to $2,500.
2026 and Beyond: It becomes even stricter, with a $600 threshold, meaning many more people will receive a 1099-K.
Why Does This Matter?
If you receive payments through apps like PayPal or sell items on marketplaces like eBay, these thresholds determine whether you’ll get a 1099-K form and need to report that income to the IRS.
For many small business owners and gig workers, these changes highlight the importance of tracking income carefully, as the lower thresholds could lead to more tax obligations.
Good News for 2024
The IRS has also announced some transition relief for 2024:
Payment platforms won’t face penalties for failing to withhold backup taxes during the year.
This is meant to give businesses and payment platforms more time to adjust to the changing rules.
What Can You Do Now?
Keep Good Records: Make sure you’re tracking all your income, especially if you use multiple platforms for payments.
Talk to Your Accountant: They can help you navigate these changes and prepare for how they might impact your taxes in the coming years.
Plan Ahead: With the thresholds dropping in 2025 and 2026, it’s worth reviewing your payment strategies to avoid surprises.
These changes may feel overwhelming, but being informed and proactive can make all the difference. Stay tuned for more updates as the IRS continues to roll out new guidance! Looking for more guidance on this topic?