This tax season, freelancers and side hustlers may receive a new form in the mail — IRS tax form 1099-K. After two years of delays, the IRS is finally implementing a tax reporting change, which requires third-party payment apps like PayPal, Venmo, and Cash App to issue a 1099-K for anyone who earns self-employment income over a certain amount through these apps each year. If you earned $5,000 or more on a third-party app last year, you can expect to receive this tax form. This story is part of Taxes 2025, CNET’s coverage of the best tax software, tax tips, and everything else you need to file your return and track your refund. If you own your own business, freelance, or have a side hustle, you’re likely familiar with 1099 tax forms. You may have received a 1099-NEC from companies you’ve worked with before. A 1099-K is similar, but instead of the company issuing the form, the payment platform will send you the tax form. This isn’t a new tax rule – you’re required to report your freelance or self-employment income regardless of receiving a tax form. It’s a reporting change that shifts the requirement to payment apps so the IRS can monitor income earnings more effectively.
“The taxation and tax treatment requirements for taxpayers have not changed,” said Mark Steber, chief tax information officer for Jackson Hewitt. “This income has always been considered taxable by the IRS and should be reported on a tax return.” CNET
Although the IRS will have closer oversight of freelance earnings, they are not interested in personal transactions you make with family and friends. For example, if you pay your roommate your share of the rent through Venmo, these transactions are not taxable.
Here’s everything you need to know about the new 1099-K tax reporting change.
What is a 1099-K?
A 1099-K is a tax form that reports income received through a third-party payment platform from non-permanent jobs like side hustles, freelance work, or contractor positions where taxes are not withheld. Third-party payment apps like Cash App and Venmo are required to send a 1099-K to the IRS and individuals if they earned more than $20,000 in commercial payments across over 200 transactions. If you regularly make over $20,000 in freelance income, are paid through Venmo, and receive over 200 transactions in payments, you may have received a 1099-K tax form before.
What is the IRS’s new 1099-K rule?
Under new reporting requirements announced in the American Rescue Plan, third-party payment apps will eventually have to report earnings over $600 to the IRS. “Before 2024, the earnings threshold was $20,000 and 200 transactions to receive a 1099-K tax document,” said Steber. For your 2024 taxes, the IRS will phase in a new rule, requiring payment apps to report freelancer and business owner earnings over $5,000 instead of $600. This change aims to reduce inaccuracies and give the IRS and payment apps more time to work towards the eventual $600 minimum.
Why was the third-party payment app tax rule delayed?
The IRS initially planned to implement a new reporting rule that would require third-party payment apps like PayPal, Venmo, or Cash App to report income of over $600 per year to the tax agency starting in 2022. However, this reporting requirement was delayed in 2022 and again in 2023 to give payment platforms more time to prepare for accurate reporting.
Which payment apps are required to send 1099-Ks?
All third-party payment apps where freelancers and business owners receive income will be required to start reporting transactions to the IRS in 2024. Popular payment apps like PayPal, Venmo, and Cash App, as well as platforms like Fiverr or Upwork, will need to report payments that freelancers receive throughout the year. Setting up separate accounts for professional transactions on PayPal, Cash App, or Venmo could help prevent nontaxable charges from being included on your 1099-K in error.
Zelle users will not receive a 1099-K
Zelle is exempt from the 1099-K rule because it does not hold funds in an account like other payment apps. If you receive business funds through Zelle, it’s your responsibility to report all income on your tax return.
Is the IRS taxing money you send to family or friends?
No, personal transactions involving gifts, favors, or reimbursements are not considered taxable. Payments for goods or services from vendors are the ones that will be reported on a 1099-K. Personal transactions like money for birthday gifts, sharing a restaurant bill, or rent from roommates are not taxable.
Will you owe taxes if you sell items on Facebook Marketplace or Poshmark?
If you sell personal items at a loss, you won’t owe taxes on the sale. However, if you have a side hustle where you resell items for profit through payment apps, earnings over $5,000 will be considered taxable and reported to the IRS in 2024. Keeping good records of your purchases and transactions is essential to avoid paying taxes on nontaxable income.
What should you do to prepare for this reporting change?
Payment apps may ask for your tax information, like an EIN, ITIN, or SSN. If you earn more than $5,000 through multiple clients on payment apps, you’ll receive one 1099-K instead of multiple 1099-NECs. Keeping track of your earnings manually or with accounting software can help avoid reporting errors.