Understanding the IRS 1099K 2025 Rule Changes: What Businesses and Freelancers Need to Know

As 2025 draws to a close, taxpayers, small businesses, and creative professionals across Brevard County and Vero Beach are paying close attention to the latest IRS updates surrounding IRS 1099K 2025 form that reports payment transactions from third-party platforms like PayPal, Venmo, and Square.

Recent developments have added another layer of complexity. In October 2025, the IRS confirmed via newsroom release that under the One Big Beautiful Bill (OBBB), the reporting threshold will revert to $20,000 and 200 transactions (IRS, 2025a). This revision replaces the previously announced $5,000 transition limit and further delays the move toward the originally intended $600 threshold.

The IRS 1099K 2025 Transition: $20,000 is the Current Benchmark

According to the IRS’s updated FAQs, third-party payment networks are only required to issue a Form 1099-K if total payments exceed $20,000 and involve more than 200 transactions in a calendar year (IRS, 2025a).

This update means many individuals who sell online or accept payments through digital apps may not receive a 1099-K form in early 2026 — but that doesn’t mean the income isn’t taxable.

No Form Does Not Mean No Tax

A key misunderstanding among taxpayers is believing that if you don’t receive a form, you don’t owe taxes. The IRS makes it clear under Internal Revenue Code (IRC) §61 that “gross income means all income from whatever source derived.” This includes digital payments, even if a 1099-K is never issued (IRS, 2024b).

Whether you run a small business, freelance, or sell items online, you are legally required to report all taxable income. Ignoring or underreporting income can result in penalties, audits, and back taxes — all of which can compound quickly.

Why Ethical and Accurate Reporting Matters

In today’s digital marketplace, tax compliance is more visible and traceable than ever. Businesses that stay proactive, maintain clear records, and work with qualified professionals are far less likely to face compliance issues.

At DiSalvo Tax & Accounting, our team focuses on legally compliant and ethical tax preparation — ensuring your returns meet both federal and state requirements. By following the IRS Code and best practices, we help clients reduce the risk of penalties, avoid costly mistakes, and stay confident in their reporting.

Practical Takeaway: Maintain Clear Records and Seek Professional Guidance

If you receive payments for goods or services, track every transaction — even if you don’t meet the 1099-K threshold. Keep receipts, invoices, and account records organized.

Given the IRS’s ongoing modernization and data-matching capabilities, accurate documentation remains your best defense. A professional CPA firm can help ensure your reporting aligns with the law, particularly as future legislative changes continue to shape how digital income is tracked and taxed.

Final Thoughts

The recent 1099-K threshold revision highlights how quickly tax regulations can shift — often just before a new filing season begins. These ongoing changes reinforce the importance of year-round tax planning, especially for small businesses and online sellers in Florida.

As always, taxpayers should consult a qualified professional before making assumptions about their filing requirements. Even without a form in hand, your obligation to report income remains unchanged.

References

Internal Revenue Service. (2025a, October 10). IRS issues FAQs on Form 1099-K threshold under the One Big Beautiful Bill: Dollar limit reverts to $20,000. https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000

Internal Revenue Service. (2024b). 26 U.S.C. § 61 – Gross income defined. U.S. Code. https://www.law.cornell.edu/uscode/text/26/61

U.S. Department of the Treasury. (2024, August 14). Treasury Department announces modernization efforts for tax reporting compliance. https://home.treasury.gov/news

ChatGPT. (2025, October 13). Assisted synthesis of IRS reporting updates, One Big Beautiful Bill revisions, and implications for small businesses. OpenAI.

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Disclaimer: The information in this article is for general informational purposes only and should not be considered tax, accounting, or legal advice. Every situation is unique, and results may vary. For guidance specific to your circumstances, please consult a qualified professional.