If you sell on marketplaces (eBay/Etsy), take payments through apps, drive gig work, or run any kind of side hustle, Form 1099-K is still the #1 source of filing-season confusion.
Here’s what actually changed under OBBB—and what didn’t.
1) The reset: the old TPSO threshold is back (retroactively)
OBBB retroactively reinstated the pre-ARPA 1099-K reporting threshold for third-party settlement organizations (TPSOs) (think payment apps and online marketplaces).
A TPSO generally isn’t required to file a 1099-K unless both are true:
gross payments for goods/services exceed $20,000, and
number of transactions exceeds 200.
Important nuance: This is a reporting rule for TPSOs. It does not change whether the money is taxable.
2) Why you can still get a 1099-K for tiny amounts (and why you shouldn’t panic)
Payment cards have no de minimis threshold
IRS is explicit: there is no threshold to receive a 1099-K due to payment card transactions. They literally note that if you received $0.01 from payment card transactions, you should receive a 1099-K for those payments.
Even under the TPSO rule, you can still receive a 1099-K below $20k/200
IRS also says “not necessarily” when people assume the $20k/200 rule means no form—TPSOs may still send a 1099-K below the federal threshold.
Takeaway: A 1099-K is not a bill. It’s an information return. You still need to classify what the payments represent.
3) States may have lower thresholds (so you can get a form even if you’re under federal)
IRS flags that your state may have a lower reporting threshold for TPSOs, which can result in you receiving a 1099-K even when you don’t exceed the federal $20k/200 standard.
This is why people get a 1099-K and assume “the federal rule didn’t apply, so it must be wrong.” The form may be correct under state-level reporting.
4) “No 1099-K” does not mean “no tax”
IRS is direct: yes, you still have to report income even if it’s not reported on a 1099-K. The threshold doesn’t control taxability.
Translation: The tax rule is “income is taxable unless excluded.” The reporting form is just how IRS gets visibility.
5) The form reports gross payments (not your profit)
This is where mismatch notices come from.
IRS explains the “gross payment amount” on 1099-K is the total processed payments and doesn’t include adjustments like fees, refunds, shipping, discounts, etc. Those items aren’t automatically “income,” and you generally use your records to compute the right taxable amount.
So if you blindly drop Box 1a into “income” without backing out fees/refunds/cost basis, you can overstate taxable income.
Filing-season playbook: how to reconcile your 1099-Ks (fast)
Step 1: Classify what the payments actually were
Business sales / services → potentially taxable, goes through Schedule C / business return.
Personal transfers (friends/family reimbursements) → not business income, but still needs clean support if it’s mixed in.
Selling personal items → taxable only if there’s a gain; losses on personal-use items generally aren’t deductible. (This is a common “1099-K panic” case.)
Step 2: Reconcile Box 1a to your actual records
Start with 1099-K gross, then reconcile:
platform/processing fees
refunds/returns
shipping collected vs shipping paid
sales tax/VAT collected (if included in gross)
cost of goods sold / basis for items sold
IRS explicitly warns the gross number is not adjusted for many of those items.
Step 3: Keep an “audit-ready” support file
Save:
monthly platform statements
payout reports
refund logs
fee summaries
inventory/basis documentation (even simple spreadsheets beat nothing)