If you sell goods or services through online marketplaces, payment apps, or e-commerce platforms, the reporting threshold that triggers a Form 1099-K has dropped again. For tax year 2025, payment settlement entities must report aggregate payments exceeding $2,500 to any single payee. That is down from $5,000 in 2024 and the original $20,000/200-transaction threshold that existed before the American Rescue Plan Act.
What This Means in Practice
If you use platforms like Etsy, eBay, PayPal, Venmo (for business transactions), Shopify Payments, or similar services and your gross receipts through any single platform exceed $2,500 during 2025, you will receive a 1099-K in January 2026. This is a reporting threshold, not a tax threshold. Receiving a 1099-K does not mean the entire amount is taxable income.
The form reports gross transaction amounts, which includes sales tax collected, shipping fees, refunds, and returns. Your actual taxable income is the gross amount minus your cost of goods sold, business expenses, and any non-business transactions that were incorrectly included.
Common Problems and How to Avoid Them
Personal transactions mixed with business. If you use the same PayPal or Venmo account for both personal and business transactions, the platform may include personal transfers in your 1099-K total. The IRS guidance says personal transactions (splitting dinner, reimbursing a friend) are not taxable, but you need records to prove which transactions were personal. The easiest fix: use separate accounts for business and personal transactions.
Gross vs. net reporting. A 1099-K shows gross payments before platform fees, refunds, or chargebacks. If you received $5,000 in gross sales but paid $500 in platform fees and issued $300 in refunds, your 1099-K still shows $5,000. You deduct the fees and refunds on your tax return. Keep platform statements that show the breakdown.
Multiple platforms. Each platform reports independently. If you sell on both Etsy and eBay and each exceeds $2,500, you will receive two 1099-K forms. Make sure your tax return accounts for all platforms without double-counting.
Record-Keeping Steps
Start now, not at tax time. Export monthly transaction reports from every platform you use for business. Categorize each transaction as business income, personal, refund, or non-taxable. Keep receipts for cost of goods sold. When January arrives and the 1099-K forms show up, you will be ready to reconcile rather than scrambling to reconstruct a year of transactions.
The $600 threshold originally scheduled under the ARP was never implemented, but the direction is clear: more reporting, lower thresholds, and greater IRS visibility into online commerce. Treat your online selling like the business it is.