1099-K $600 Threshold: What Is the Current Rule?

Form 1099-K is an information return used by payment card companies and third-party settlement organizations (TPSOs), like payment apps and online marketplaces, to report payment transactions. A planned reduction of the reporting threshold to $600 has caused confusion for individuals and businesses who use these platforms. This article clarifies the current federal and state rules.

The Current Federal Reporting Threshold

For the 2024 tax year, the federal reporting threshold for Form 1099-K from a TPSO is for payments exceeding $5,000. This threshold applies to the gross amount of payments for goods or services, with no minimum transaction count. This is a change from the prior rule, which required reporting only for over 200 transactions that totaled more than $20,000. These thresholds do not apply to payment card transactions, such as from credit or debit cards, which are reported regardless of the amount.

The lower threshold is part of a phased-in approach by the Internal Revenue Service (IRS). The agency is transitioning toward a $600 reporting rule originally mandated by the American Rescue Plan of 2021, but has delayed its full implementation. Even with the current thresholds, a TPSO may still choose to issue a Form 1099-K for amounts lower than the required reporting minimum.

Understanding What is Reported on Form 1099-K

The amount shown in Box 1a of Form 1099-K represents the gross amount of all payment transactions processed for you by the payment settlement entity. This figure is a total of all payments and does not account for adjustments like fees paid to the platform, credits, or refunds. Because of this, the gross amount on the form is not necessarily your taxable income.

A distinction must be made between reportable payments for goods and services and non-reportable personal transactions. Payments for selling items online, freelance work, or driving for a ride-hailing platform are examples of reportable transactions that constitute income.

Personal transactions are not reportable and should not be included as income, such as receiving money from a friend as a gift or getting reimbursed for a shared bill. Many payment apps include features that allow users to designate a transaction as personal, which helps prevent these payments from being mistakenly included on a Form 1099-K.

State-Specific 1099-K Reporting Rules

Taxpayers must also be aware of the rules in their state of residence, as several have their own lower reporting thresholds for Form 1099-K. These state-level requirements are independent of the federal rules. A taxpayer might receive a 1099-K based on state law even if they do not meet the federal reporting criteria.

Several states have adopted a $600 reporting threshold, regardless of the number of transactions. These include:

• Maryland
• Massachusetts
• Vermont
• Virginia

Illinois has a requirement where a Form 1099-K is issued for gross payments exceeding $1,000 with four or more separate transactions.

How to Handle a Form 1099-K on Your Tax Return

Upon receiving a Form 1099-K, you must reconcile the gross amount in Box 1a with your own records. This involves comparing the reported figure to your actual business income from that platform. The goal is to identify the portion of the gross amount that represents taxable income versus any non-taxable amounts, such as personal reimbursements.

If the income is from self-employment or an independent contracting business, you will report the gross income on Schedule C (Form 1040), Profit or Loss from Business. On this form, you can deduct business expenses—such as supplies and platform fees—to arrive at your net, taxable profit. For income derived from rental properties, the reporting would occur on Schedule E (Form 1040).

If the Form 1099-K includes income from a hobby or the sale of personal items for a gain, this is reported on Schedule 1 (Form 1040). Should the form include non-taxable transactions, you must adjust your reported income. For example, you can report the full 1099-K amount on Schedule 1 and then include a corresponding negative adjustment on the same schedule, labeling it to explain the discrepancy.