If your business accepts payments through PayPal, Venmo, Etsy, or a card processor, a Form 1099-K may be headed your way early next year — and last year’s tax legislation changed the rules on who gets one.
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What happened
For the 2025 tax year (forms due to recipients by January 31, 2026), payment apps and online marketplaces are required to issue a 1099-K once a business owner crosses $20,000 in payments and 200 transactions in a calendar year, according to TurboTax. That threshold — originally set to drop much lower under a phased-in rule — was reinstated at the higher $20,000/200-transaction level by the One Big Beautiful Bill Act, the sweeping tax legislation passed in mid-2025.
Payment card processors work differently: banks, Visa, MasterCard, and similar processors have no dollar threshold at all — they must report every credit, debit, and gift card transaction regardless of amount.
Why it matters
The form reports gross payments received — the total value of every transaction before fees, refunds, shipping costs, or discounts are subtracted. That’s not the same as taxable income, and it trips up business owners every year. A 1099-K showing $30,000 doesn’t mean $30,000 in profit; it means $30,000 moved through that payment channel before any deductions are applied.
The bigger issue: even businesses that stay under the $20,000/200-transaction threshold and never receive a 1099-K are still legally required to report that income. The form is a reporting mechanism for the IRS, not the trigger for whether income is taxable.
What this means for small business owners
Before forms start arriving in January, it’s worth checking three things now: whether your payment volume this year is on pace to cross the threshold, whether your bookkeeping already separates gross payment volume from actual profit (fees, refunds, and discounts included), and whether prior-year 1099-Ks match what’s in your books. Mismatches between what a processor reports and what you’ve recorded are one of the more common triggers for IRS follow-up questions.
If a form does arrive and the numbers look off — a refund not backed out, a duplicate transaction — request a corrected form from the issuer rather than adjusting your own return to match a number you know is wrong.
“The total amount of payments you receive from a payer are reported on Form 1099-K, but you typically only have to pay tax on any profits from the related sales.” — TurboTax
The bottom line
The threshold held steady this year, but the compliance risk hasn’t gone anywhere: gross payment totals and taxable profit are two different numbers, and the IRS is watching for businesses that report income mismatched against what’s showing up on 1099-Ks. Reconciling payment processor records against your books before tax season, not after a form lands in your inbox, is the difference between a clean filing and a scramble in April.
