Trump's Big Beautiful Bill Promises 1099-K Relief For Online Sellers
With the Republican-led House passing the "One Big Beautiful Bill Act" there will undoubtedly be continued debate about the full economic implications of the budget, but there's at least one big win for online sellers with a provision lifting the threshold for 1099-K reporting back to its previous levels of more than $20,000 and more than 200 separate transactions per year.
Under current law, third-party payment processors like PayPal, Venmo and CashApp as well as marketplaces like eBay, Etsy, Amazon and more must issue Form 1099-K to payees receiving gross payments exceeding $600 for goods or services, regardless of the number of transactions.
The change in reporting thresholds was supposed to take effect following the American Rescue Plan of 2021 (ARPA).
However, after repeated delays in implementation, the IRS announced in November 2024 that it would take a phased step down approach, lowing the reporting threshold to $5,000 for 2024, $2,500 for 2025, and finally down to $600 for 2026 and beyond, as originally mandated by ARPA.
Liz Morton
But that could all change if the One Big Beautiful Bill Act is passed and signed into law as currently written, with "Sec. 111104. Repeal of revision to de minimis rules for third party network transactions" returning the 1099-K threshold to its previous levels.
SEC. 111104. REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY NETWORK TRANSACTIONS.
(a) Reinstatement of Exception for De Minimis Payments as in Effect
Prior to Enactment of American Rescue Plan Act of 2021.--(1) In general.--Section 6050W(e) is amended to read as follows:
(e) Exception for De Minimis Payments by Third Party Settlement Organizations.--A third party settlement organization shall be required to report any information under subsection (a) with respect to third party network transactions of any participating payee only if--
- the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions exceeds $20,000, and
- the aggregate number of such transactions exceeds 200.
(2) Effective date.--The amendment made by this subsection shall take effect as if included in section 9674 of the American Rescue Plan Act.
Importantly, this change will not retroactively impact 1099-K reporting for the 2024 tax year but would raise the threshold for the 2025 tax year and beyond.
This legislation would only apply to the federal 1099-K reporting requirements - several states have their own laws with lower thresholds that will remain in place, so if you're in one of those states, those laws will still apply.
And just because you may not receive a 1099-K, that does not necessarily mean you won't have to report or pay taxes on any income made through ecommerce sales below the $20,000 threshold.
As always, sellers are encouraged to consult a qualified tax professional to determine how this change might impact their specific business operations and income reporting requirements.
The One Big Beautiful Bill Act was passed by the House this morning and now moves to the Senate.
While it's likely the Senate will look to make their own changes and amendments to the bill, the 1099-K threshold provisions have not met with significant resistance or controversy thus far and are likely to be retained in the final version.
Stay tuned for updates in this developing story.
