For the 2025 tax year, the threshold will drop to $2,500.
If you earnfreelance or self-employment income, you’re likely no stranger to1099 tax forms.
The new 1099-K tax reporting rule only applies to income you earned from third-party payment apps.
The IRS is not taxing the money you send to your friends or family.
Here’s everything else you should know about the new 1099-K tax reporting change.
Read more:Updated IRS Federal Tax Brackets Could Boost Your Paycheck Next Year.
Here’s Why
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What is a 1099-K?
What’s the 1099-K rule for tax year 2024?
Why was the IRS’s 1099-K tax rule delayed?
The IRS delayed this new reporting requirement in 2022 and again in 2023.
Distinguishing between taxable and nontaxable transactions through third-party apps isn’t always easy.
The delayed rollout gave payment platforms more time to prepare.
Which payment apps will send 1099-Ks?
Some popular payment apps include PayPal, Venmo and Cash App.
There’s one popular payment app that’s exempt from the 1099-K rule.
How do you file a 1099-K?
If you file using online tax software, it will guide you through reporting your income.
Be careful that you don’t double-report your income.
You do not need to report your earnings twice.
Is the IRS taxing money you send to family or friends?
Personal transactions involving gifts, favors or reimbursements are not considered taxable.
In other words, that money from your roommate for her half of the restaurant bill is safe.
“This is only for self-employment income,” Steber said.
What if you receive a Form 1099-K in error?
You should then be issued a corrected 1099-K.
The IRS says tofollow these three steps:
