1099-K Threshold for 2023: What Changed and Where It Stands Today

If you sold goods or earned income through apps like PayPal, Venmo, or online marketplaces in 2023, you may have wondered whether you would receive a Form 1099-K. That calendar year marked a pivotal moment in the IRS's ongoing effort to lower the reporting threshold for third-party network transactions, and the landscape has changed dramatically since then. Here is a complete look at what the 1099-K threshold was for tax year 2023, how reporting requirements evolved, and where the rules stand today under the One Big Beautiful Bill Act (OBBBA).

What Is Form 1099-K?

Form 1099-K, Payment Card and Third Party Network Transactions, is an IRS information return used to report payments processed through two channels:

• Payment card transactions: payments made by customers using credit cards, debit cards, or gift cards (processed through merchant acquiring entities)
• Third-party network transactions: payments settled through third-party settlement organizations (TPSOs) such as PayPal, Venmo, Cash App, Etsy, eBay, and other online marketplaces

The form reports gross payment amounts to the IRS and to the payee's account on file. Keep in mind that receiving a 1099-K does not mean every dollar is taxable income. Personal transfers (gifts, reimbursements, splitting a dinner check) should not appear on the form, and the sale of personal items at a loss is not taxable. However, all income must be reported on your tax return whether or not you receive any information forms.

The Original Reporting Thresholds

When Form 1099-K was introduced in 2011, the reporting rules created two distinct thresholds:

• Payment card transactions: no minimum threshold. Processors were required to report all gross amounts, regardless of how small.
• Third-party network transactions (TPSOs): reporting was required only when payments to a single payee exceeded $20,000 AND the number of transactions exceeded 200 in a calendar year.

This two-part test (both the dollar threshold and the transaction count had to be met) meant that many casual sellers and gig workers on popular platforms never received a 1099-K.

The American Rescue Plan Act Changed Everything

The American Rescue Plan Act of 2021 (ARPA), signed into law in March 2021, dramatically lowered the TPSO reporting threshold. Section 9674 of ARPA:

• Reduced the dollar threshold from $20,000 to $600
• Eliminated the 200-transaction requirement entirely

This update was scheduled to take effect for calendar year 2022. It would have meant that anyone receiving more than $600 in payments through a platform or app would get a 1099-K. The IRS recognized the operational challenges this created for both taxpayers and payment processors, leading to a series of delays.

The 1099-K Threshold for Tax Year 2023

In November 2023, the IRS announced that 2023 would be treated as an additional transition year for the lower TPSO reporting threshold. This was the second consecutive delay (2022 was the first). Under this transition relief:

• TPSOs were not required to file 1099-K forms for 2023 unless payments to a payee exceeded $20,000 AND the transaction count exceeded 200
• The $600 threshold from ARPA was postponed again
• The IRS signaled its intent to enter a $5,000 reporting threshold for 2024 as a phased approach

It is worth noting that payment card transactions (credit and debit cards) were never subject to the $20,000/200 threshold. Card processors have always been required to report all payment card amounts to the IRS, regardless of income level or number of transactions. The transition delay applied exclusively to TPSOs.

What Happened After 2023: The Phase-In Plan

In November 2024, the IRS issued Notice 2024-85, establishing a reporting threshold phase-in schedule for TPSOs:

• 2024: $5,000 threshold
• 2025: $2,500 threshold
• 2026 and beyond: the full $600 threshold from ARPA

This graduated approach was designed to give platforms, small business owners, and taxpayers time to adjust their record-keeping. However, this plan never fully took effect.

OBBBA Permanently Restored the $20,000 Threshold

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, included Section 70432, which retroactively repealed the ARPA change. The legislation specifies that the repeal takes effect "as if included in section 9674 of the American Rescue Plan Act," meaning it retroactively kept the original reporting thresholds in place.

Under the IRS FAQs in Fact Sheet 2025-08:

• The 1099-K reporting threshold for TPSOs is permanently restored to $20,000 AND 200 transactions
• The $600 threshold from ARPA no longer applies for any tax year
• The $5,000 and $2,500 phase-in thresholds from Notice 2024-85 are superseded

This means the reporting landscape for payment apps and online marketplaces has returned to what it was before ARPA, providing long-term certainty for taxpayers and platform operators.

Complete 1099-K Threshold Timeline

• 2011 to 2021: $20,000 AND 200 transactions (original threshold)
• 2022: IRS transition year, $20,000/200 threshold maintained
• 2023: second IRS transition year, $20,000/200 threshold maintained
• 2024: Notice 2024-85 set $5,000 threshold (later superseded by OBBBA)
• 2025 onward: OBBBA permanently restored $20,000 AND 200 transactions

Do You Still Need to Report Income Below the Threshold?

Yes. The 1099-K reporting threshold determines when a payment processor or platform is required to send you (and the IRS) a form. It does not change your obligation as a taxpayer. Under federal tax law, all income is taxable unless specifically excluded, whether or not you receive a 1099-K or any other information return.

If you receive income through an app, an online marketplace, or through payment card transactions and do not receive a 1099-K, you are still required to report that income on your Schedule C (for self-employment income), Schedule D (for capital gains on sold items), or the appropriate form for your situation. Good record-keeping will help you stay compliant and make tax season easier.

What to Do If You Receive a 1099-K With Errors

Payment platforms may still issue a 1099-K even when amounts fall below the reporting threshold. If you receive one that includes personal, non-taxable transactions (like money from a friend repaying you for concert tickets), the IRS provides a way to address this on your return. You can enter the 1099-K amount and then zero out the non-taxable portion on Schedule 1 (Form 1040).

If the form contains outright errors (wrong dollar amounts, wrong taxpayer identification, or a wrong address), contact the platform directly and request a corrected form before you file.

How Arizona Taxpayers Are Affected

Arizona conforms to the federal treatment of 1099-K reported income. The state's flat 2.5% income tax rate applies to all taxable income, including payments reported on Form 1099-K. Arizona does not impose a separate state-level reporting requirement on platforms. If you are an Arizona small business owner or independent contractor who receives payments through third-party apps, your federal 1099-K (or lack thereof) carries through to your Arizona return.

How K&R Taxes Can Help

Navigating IRS scrutiny on peer-to-peer payments and online marketplace transactions can be confusing, especially after years of threshold changes and legislative updates. Whether you are a freelancer, a small business owner accepting payments, or an individual selling items through platforms like eBay or Etsy, our advisors at K&R Taxes can help you understand your reporting obligations, reconcile 1099-K forms with your actual income, and keep your tax return accurate and compliant.

If you have received a 1099-K and are unsure how to handle it, or if you need help with IRS correspondence related to unreported income, contact us today to schedule a consultation.