IRS 2025 Rules for Payment Apps
If you use payment apps such as PayPal, Venmo, Cash App, Zelle, Stripe, Square, eBay, Etsy, or Airbnb to get paid for your products, services, or side gigs, there are important IRS updates you should know about.
Beginning in 2025, the IRS has restored the long-standing reporting rule that was in place before 2022:
Payment apps must issue Form 1099-K only if total payments to a user exceed $20,000 and there are more than 200 transactions in a calendar year.
That means the temporary $600 and $5,000 thresholds discussed in earlier transition guidance are no longer in effect at the federal level. The familiar $20,000 / 200-transaction standard is back.
However, several states continue to enforce their own lower reporting thresholds, so you could still receive a 1099-K even if you’re under the federal limits.
Quick Recap of the 2025 IRS Guidance
Here’s what the current IRS position means in plain language:
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The $20,000 and 200-transactions rule now applies to payment-app transactions.
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There is no threshold for credit- or debit-card payments processed by merchant acquirers — even a single swipe can trigger a 1099-K.
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All taxable income must still be reported, whether or not you get a 1099-K.
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Filers must use accurate Taxpayer Identification Numbers (TINs) and apply backup withholding when required.
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The IRS encourages users to keep business and personal payments separate to avoid personal transfers being reported as income.
Examples That Bring It to Life
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You sell handmade candles on Etsy and earn $9,000 from 90 orders → No federal 1099-K (below both thresholds), but if you live in Massachusetts, you’ll still get one.
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You run a weekend catering side gig and receive $2,800 through Square in Arkansas → The app must file a 1099-K because the state threshold is $2,500.
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You freelance as a designer and receive $950 through PayPal in New Jersey → You will not receive a 1099-K because the state threshold is $1,000.
States (and D.C.) With Lower or Stricter 1099-K Rules
Even though the federal rule is $20,000 and 200 transactions, the following states and jurisdictions still require payment apps to report at lower levels:
| State / Jurisdiction | State Threshold |
|---|---|
| Massachusetts | $600 |
| Maryland | $600 |
| Virginia | $600 |
| Vermont | $600 |
| District of Columbia | $600 |
| Illinois | $1,000 and 4 transactions |
| New Jersey | $1,000 |
| Arkansas | $2,500 |
Why This Still Matters
Even if you don’t receive a 1099-K, you’re still responsible for reporting all taxable income. The form reports gross payments, not your actual profit — refunds, fees, shipping, and expenses must still be reconciled.
If you sell online, use multiple apps, or operate in more than one state, accurate bookkeeping is essential to avoid mismatches between what’s reported to the IRS and what appears on your return.
Tips for Staying Compliant
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Use separate accounts for personal and business transactions.
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Track deposits, fees, and refunds so totals match your books.
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Verify your address — state thresholds depend on it.
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Collect W-9 forms from contractors you pay through apps.
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Talk to your CPA before year-end about multi-state reporting rules.
How Strand Tax & Accounting Services Can Help
At Strand Tax & Accounting Services, we help small-business owners, freelancers, and platform sellers stay compliant with evolving 1099-K requirements. Whether you receive income through PayPal, Stripe, Etsy, Airbnb, or Shopify Payments, we can:
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Review and reconcile 1099-K transactions
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Build a state-by-state reporting checklist
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Design clean accounting categories for payment-app sales
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Handle IRS or state notices if you receive one
Contact Strand Tax & Accounting Services today to keep your payment-app reporting accurate, compliant, and stress-free.