For anyone selling online—whether you’re running a full-scale eCommerce business or simply cleaning out your attic—tax season can feel like a maze. Over the past few years, few changes have caused as much uncertainty as the sudden lowering of the 1099-K reporting threshold.
The good news is that some clarity is finally here. In July 2025, the United States Congress will officially restore the 1099-K reporting threshold to the previous levels: $20,000 in gross payments and more than 200 transactions. This is a substantial shift from the much-criticized $600 threshold that had been looming over sellers since it was enacted in 2022.
This update isn’t just about numbers on a form. It’s about how online sellers—from hobbyists to growing brands—report income, track transactions, and plan their finances.
Understanding What Changed
To really understand why this matters, it’s helpful to know what Form 1099-K is for.
Payment platforms like PayPal, Stripe, and large online retailers such as Amazon, eBay, and Etsy use this form to report all the money you receive through their services.
The form is sent to the IRS, and you receive a copy as part of your tax documents.
Before 2022, this form only came if your sales were more than $20,000 in a year and you had over 200 transactions.
Most people who just sold things online never hit that mark, so tax reporting stayed simple for them.
That changed quickly when the American Rescue Plan Act cut the reporting level down to just $600, no matter how many transactions you had.
Suddenly, millions of people who only sold things occasionally were getting tax forms they didn’t expect. They were confused about whether those payments counted as income and had to deal with figuring out which transactions were personal and which were business.
For many small sellers, it felt unfair: one sale of a used couch or an old laptop could trigger a 1099-K, even when it wasn’t really income in the usual way.
Why the Reversal Matters
The reversal back to the $20,000 and 200 transactions threshold brings relief on several fronts.
First, it reduces the paperwork headaches for individuals who use marketplaces casually. Not everyone selling online is running a business—many are simply cleaning out closets, helping a relative downsize, or making a few extra dollars on old gear.
Second, it lightens the compliance burden for marketplaces themselves. With the $600 limit, platforms had to prepare and send millions of additional forms, adding operational costs and complexity.
Finally, it helps clearly separate real business income from personal sales that happen by chance. This makes it easier for both the IRS and taxpayers to follow the rules and understand what’s expected.
What Sellers Still Need to Remember
Even though the higher reporting threshold for reporting has started anew, it is worth noting that all online income still has to be reported and paid taxes on according to federal law. Not getting a 1099-K form does not equate to not reporting your income.
They do need to have a close account of every sale—what was sold, when the sale was made, how much it was, and what the costs were on the sales.
Maintaining good records gets you prepared for an audit or in the case that your state has different stricter regulations.
Also, you should be aware that not all states are working under the same regulations as the government.
For instance, Massachusetts and Vermont states still require the collection of 1099-K forms for over $600 sales, even though the federal line was increased. That leaves sellers in those areas possibly still being sent forms at that lower ceiling, even after the federal change is implemented.
My Perspective on the Update
This rollback is a step in the right direction for the eCommerce community. While there’s no question that tax compliance is necessary, the $600 threshold blurred the line between businesses and individuals in a way that created more confusion than clarity.
For many people who just wanted to sell a few things online, the experience became unnecessarily stressful. Seeing a 1099-K arrive in the mail—especially if you didn’t know it was coming—felt like being accused of running an unreported business.
Returning to the higher threshold doesn’t mean income goes unreported. It simply helps target enforcement toward actual businesses rather than casual sellers, which was always the spirit behind the original thresholds.
Final Thoughts
If you’re selling online, then this update is a good opportunity to review how you track your money and what you need to do with taxes. While fewer 1099-K forms are being mailed out, all that money you earn still has to be reported when you file your taxes.
For online businesses and websites that accept payments, this move could simplify invoicing by reducing unnecessary paperwork and phone calls to inquire about payments.
There could be more alterations in the future from Congress or the IRS to keep things in line with how individuals earn money online.
Until then, keeping current and doing something about it is the best course of action.
If you’ve seen anything different in the way things operate or if you have suggestions regarding how this update may impact other sellers, let me know.
Speaking candidly and openly can assist in making the tax system more transparent, which has been quite complicated for a very long time.
