Attention Small Businesses and Freelancers: 1099-K Filing Changes Are Here

Changes to 1099-K Filing: What You Need to Know

In recent years, the IRS has implemented stricter reporting requirements to help reduce underreported income. For 2024, the threshold for receiving a 1099-K has been updated to $5,000 in payments for goods and services. This change means that more small businesses, freelancers, and gig economy workers will likely receive a 1099-K form for the first time. With this increase in reporting, there’s also a growing paper trail for the IRS to track taxable transactions.

For many, this will be their first experience with the 1099-K. If you’re receiving payments via third-party platforms like PayPal, Venmo, or eBay, and you hit the $5,000 threshold for goods and services transactions, you’ll receive a 1099-K. It’s important to note that this applies only to business transactions — personal payments from family and friends are not included. The form helps the IRS track taxable income, but it’s also crucial to make sure the amounts reported on the 1099-K match your own records.

More Changes Ahead in 2025 and 2026

While the 2024 threshold is $5,000, this is set to drop in 2025 to just $2,500 in payments for goods and services and the threshold is scheduled to a further reduction of $600 in 2026. This means that if you have transactions exceeding $2,500 in 2025, you’ll receive a 1099-K for the 2025 tax season. As a result, even more individuals who previously may not have been aware of their filing obligations will need to report these payments to the IRS.

Receiving a 1099-K is not a cause for alarm, but it does mean you’ll need to carefully track your transactions. Be sure to differentiate between personal payments and business payments. Keep thorough documentation of income and expenses to ensure you’re not overreporting or underreporting your earnings. Discrepancies between your own records and the 1099-K could lead to an IRS audit or penalties.

One platform, PayPal, has been particularly helpful in providing additional information to learn more about the updated reporting thresholds for 2024, visit PayPal’s official help page.

Staying organized and understanding these changes will help you navigate the filing process and avoid potential surprises at tax time. If you have questions on how these changes may affect you, your ShindelRock team is here to help you.