IRS Reverses Hated Biden Tax Reporting Requirement

The IRS is changing a Biden-era policy that critics pointed out forced banks and online money apps to report deposits from Marketplace and Ebay sales, plus other gig income. In a major decision benefiting taxpayers, the  IRS issued a fact sheet on Oct. 23, announcing changes made to the FAQ section in Form 1099-K based on amendments made under the One Big Beautiful Bill Act, the agency said in a statement released on Thursday.

Form 1099-K is applicable to individuals who engage in gig work or casually sell goods online. Third-party settlement organizations (TPSOs), including online marketplaces such as Amazon and eBay, and payment apps like PayPal and Venmo, are required to prepare the form and send copies to the IRS and the taxpayer. The form details the payment amounts received by the taxpayer from the sale of goods and services.

For tax years 2023 and prior, a TPSO had to issue Form 1099-K if payments totaled more than $20,000, and there were at least 200 transactions. However, the Biden American Rescue Plan (ARP) Act, passed in 2021 by the Biden administration, brought down the threshold to $600.

The decision triggered protests from TPSOs and taxpayers. Subsequently, the IRS gradually lowered the threshold, setting it at $5,000 for 2024 and $2,500 for 2025. Now under the Trump administration it will be just $600 from 2026 onwards.

The One Big Beautiful Bill Act, signed into law by President Donald Trump on July 4, reversed the Biden-era changes made to the payment thresholds.

As such, TPSOs are now “not required to file a Form 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200,” according to the fact sheet.

Generally, only taxpayers who meet these thresholds will receive a Form 1099-K from a TPSO. However, certain states may have a lower reporting threshold, it said.

In a May 13 statement, the Coalition for 1099-K Fairness had called on including the threshold reversal in the One Big Beautiful Bill.

The Biden American Rescue Plan Act’s $600 threshold “threatened to overwhelm small businesses and individuals utilizing payment apps with confusing tax forms and expose millions of transactions to unnecessary scrutiny,” the coalition said.

“Reinstating the previous standard brings clarity and consistency back to hardworking Americans and reduces administrative waste for both taxpayers and the IRS.”

The latest change results in less paperwork and fewer surprises for Americans who engage in casual sales or make modest income online, the coalition said on its website.

By Naveen Athrappully | Epoch Times News Service