Tax reporting requirements for users of third-party payment apps like Venmo and PayPal are being significantly relaxed under new federal legislation.
On July 4, President Donald Trump signed the ‘One Big Beautiful Bill’, which resets the Internal Revenue Service (IRS) reporting threshold for third-party payment platforms to $20,000 per year.
This marks a reversal of a Biden-era tax law that had lowered the threshold to $600, requiring anyone who received more than that amount in business transactions through platforms like Venmo or PayPal to report the income via Form 1099-K.
The $600 rule was originally passed in 2021 but faced repeated implementation delays. It was scheduled to take effect gradually, starting at $5,000 in 2023 and dropping to $2,500 in 2024.
The newly signed law eliminates the phase-in approach and reinstates the pre-2022 threshold, which requires reporting only if the user has more than 200 transactions totaling over $20,000 in a calendar year. This change effectively removes most small business and casual sellers from automatic IRS reporting by payment platforms.
However, this does not remove the requirement for taxpayers to report all income. Individuals must still accurately report earnings, even if they do not receive a 1099-K.
The new law also raises the threshold for reporting contractor or freelance payments under Forms 1099-NEC or 1099-MISC. Beginning next year, businesses will only need to file these forms if they pay $2,000 or more, up from the current $600 minimum. This threshold will be adjusted annually for inflation.
Some lawmakers and analysts have raised concerns about potential revenue losses. The Joint Committee on Taxation estimates that the revised thresholds could reduce federal tax revenue by approximately $13 billion over the next decade.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
