If you use apps like Venmo, PayPal, or Cash App for business transactions, the IRS has new rules that could impact you. In 2025, new reporting thresholds will take effect, requiring more businesses and independent contractors to receive Form 1099-K for transactions processed through these platforms. Let’s break down what this means for you.

What’s Changing?
Previously, third-party payment processors were only required to issue a 1099-K if a user received over $20,000 and had more than 200 transactions in a year. However, the IRS has lowered the threshold to $5,000 for 2024 transactions, with plans to reduce it to $600 in 2025. This means many more people will receive tax forms they never had before.

Who Does This Affect?

• Small business owners and freelancers who accept payments through platforms like PayPal, Stripe, and Square.
• Side hustlers selling products or services via e-commerce sites like Etsy or eBay.
• Rental property owners who receive payments through platforms like Airbnb.

What Should You Do?

• Keep accurate records of business vs. personal transactions. Personal payments (such as a friend reimbursing you for dinner) are not taxable.
• Track deductible expenses to reduce taxable income.
• Consult a tax professional to avoid unnecessary penalties.

Final Thoughts
With these new reporting rules, the IRS is increasing oversight on digital transactions. If you receive a 1099-K, make sure you understand your tax obligations and report your income properly. Need help? Contact our firm for expert guidance.