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The reporting landscape for digital payments has finally settled. In a significant administrative move welcomed by US businesses, gig workers, and international entrepreneurs, the IRS has published Fact Sheet 2025-08 (FS-2025-08) to provide definitive answers on the Form 1099-K threshold change.
This guidance formally confirms that the previously controversial low threshold of $600 has been repealed. Instead, the longstanding, higher reporting threshold for third-party payment apps has been permanently reinstated for federal tax purposes.
For international businesses (especially those based in regions like India) operating US LLCs or corporations, understanding this specific rule is key to simplifying end-of-year tax compliance and avoiding unnecessary paperwork.
The recent clarity on Form 1099-K stems from legislation known as the “One Big Beautiful Bill Act” (OBBBA). This Act retroactively repealed the changes made by the American Rescue Plan Act of 2021 (ARPA), which had lowered the threshold to just $600 with no minimum transaction count.
The OBBBA’s immediate effect is the restoration of the reporting standard that was in place from 2011 to 2021. This means the phased-in thresholds of $5,000 (for 2024) and $2,500 (for 2025) that the IRS had previously planned are no longer applicable for federal tax reporting.
Form 1099-K is an informational return used to report payments received for goods or services from two main sources: Payment Cards and Third-Party Network Transactions (TPSOs). The reporting threshold applies differently to each category.
Third-Party Settlement Organizations (TPSOs) include digital payment apps (like Venmo or PayPal for business), online marketplaces (like Etsy or eBay), and gig platforms.
Under the guidance in IRS FS-2025-08, a TPSO is required to file a Form 1099-K for a payee only if both of the following conditions are met during a calendar year:
If you fall below either of these metrics for a given TPSO, that organization is generally not required to send you a Form 1099-K.
It is crucial to note that the $20,000/200 transaction threshold does not apply to payments received through payment cards (credit cards, debit cards, or stored-value cards).
The IRS explicitly states that there is no minimum threshold for payments received via a payment card transaction. Therefore, if you receive a single payment card transaction for goods or services, the payment processor (a merchant acquiring entity) should issue you a Form 1099-K, regardless of the amount.
This distinction is important for US businesses that accept payments both directly via credit card processors (like Stripe or Square) and via third-party apps.
The IRS fact sheet addresses several common areas of confusion resulting from the retroactive nature of the OBBBA.
Yes. The OBBBA change to the reporting threshold is effective as if it were included in the original ARPA legislation. This applies to tax years beginning after December 31, 2021. This retroactivity is the reason the IRS repealed the interim thresholds.
Due to the shifting legislation, some taxpayers may have already received a Form 1099-K for payments made in prior years (e.g., 2023 or 2024) based on lower thresholds (like $5,000 or even $600, if issued early).
The IRS guidance confirms that if you received a Form 1099-K, you should use it to prepare your tax return. The payment settlement entities that issued these forms are not required to withdraw or correct them. You are responsible for accurately reporting your gross income and documenting any adjustments (like personal item sales at a loss) on your return.
This is a critical point, especially for foreign-owned US LLCs that may be registered in states with varying rules.
The OBBBA only sets the federal reporting threshold. Many US states have adopted lower thresholds for Form 1099-K reporting than the federal standard. If your business operates in a state with a lower threshold, you may still receive a Form 1099-K from a TPSO even if you do not meet the federal $20,000/200 transaction requirement.
The restoration of the high reporting threshold is a regulatory relief, not a tax loophole.
The IRS guidance is unequivocally clear: The reporting threshold does not affect whether an amount is taxable income or whether a tax return must be filed.
For international founders and US expats, navigating the reporting requirements for digital transactions, federal and state tax filings, and complex information returns (like Form 1099-K, Form 5472, and FBAR/FATCA) can quickly become overwhelming.
At TheTaxBooks, we specialize in providing professional, authoritative US tax and accounting services. Led by Principal Consultant Kishore Chennu (MBA, CMA, EA-IRS (US)), our 15+ years of experience ensure your business remains compliant.
We provide comprehensive services, from US Company Formation and US Bank Account Opening Assistance to Federal and State Tax Filing and Bookkeeping allowing you to focus on your business while we manage the precise complexities of US tax compliance, including correct handling of all your information reporting forms.
To learn more about how you can reduce your taxes and save money, check out the helpful resources on our blog or contact us today to schedule a consultation.
