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Understanding the New 1099-K Rules for Side Hustles and Online Sellers in 2025

If you made money through platforms like Etsy, eBay, Uber, DoorDash, PayPal, or even just split a dinner tab with a friend using Venmo, you might have heard about the 1099-K. The IRS form that’s causing confusion for side hustlers and casual sellers across the country.

As of 2025, the IRS has officially lowered the Form 1099-K reporting threshold, and it’s already affecting millions of Americans. Whether you’re a self-employed gig worker, an online store owner, or someone who occasionally flips items on eBay, understanding how this form works and what you need to do, is critical to avoiding trouble at tax time.

What Is Form 1099-K?

Form 1099-K is an IRS form used to report payments received through third-party networks such as:

  • Payment apps (PayPal, Venmo, Cash App)

  • E-commerce platforms (Etsy, eBay, Amazon)

  • Ride-share/delivery services (Uber, Lyft, DoorDash)

  • Merchant processors (Square, Stripe, Shopify)

If you receive payments for goods or services — not gifts or personal reimbursements — you may be issued a 1099-K.

Prior to 2023, most people never received a 1099-K unless they:

  • Had over 200 transactions, AND

  • Made more than $20,000 in gross payments

Thanks to the American Rescue Plan Act, the IRS lowered the 1099-K threshold to:

  • $600 in payments

  • No minimum number of transactions

This change technically took effect in 2022, but after public backlash and administrative strain, the IRS delayed enforcement. In 2025, it’s officially in place.

That means:
If you earn just $600 through third-party platforms for goods or services, you should expect to receive a 1099-K.

If you:

  • Sell on eBay, Etsy, Poshmark, or Facebook Marketplace

  • Get paid via PayPal, Venmo, or Cash App for freelance work

  • Use Stripe or Square for online business transactions

  • Deliver for Uber Eats, Instacart, or DoorDash

…you will likely receive a 1099-K if your gross payments are $600 or more for the year.

Even one large payment can trigger it.

Important: This form is for business transactions only. You won’t receive a 1099-K for personal transfers (e.g., splitting rent, sending birthday money) unless they are misclassified.

The IRS defines taxable transactions as payments for goods or services.
Common examples include:

  • Selling used items for profit (on eBay, Mercari, etc.)

  • Providing freelance services (graphic design, writing, coaching)

  • Dog walking, tutoring, lawn care

  • Getting tips through Cash App or Venmo

  • Dropshipping or online store earnings

Even if it is a hobby or part-time gig. If you earn more than you spent, the IRS considers it income.

This is a big gray area, especially for resellers.

If you sold old clothes, furniture, or electronics at a loss (less than what you paid), that’s not taxable income. But if you sold at a profit, you must report it.

Platforms like eBay now ask sellers to differentiate between personal and business sales during checkout, but confusion remains.

If you receive a 1099-K for selling personal items, don’t ignore it.  You will need to show:

  • The original purchase price

  • Proof that you sold it at a loss (receipts, bank records)

Even if you’re not running a formal business, the IRS expects you to report all taxable income ,whether you receive a form or not.

Here’s how to stay ahead of the curve:

1. Keep Clear Records

  • Save invoices, receipts, and screenshots

  • Document how much you paid for items you resell

  • Use apps like QuickBooks, Wave, or Excel spreadsheets to track income and expenses

2. Separate Personal & Business Payments

  • Use different accounts for personal and side hustle payments

  • Avoid mixing dinner reimbursements with client payments on the same platform

  • Mark personal payments correctly (e.g., “Friends & Family” on PayPal)

3. Report Your Income Accurately

Even if you don’t receive a 1099-K, you’re still legally required to report earnings from:

  • Venmo or Zelle

  • Cash payments

  • Small platforms not issuing forms

Use Schedule C (for sole proprietors) or Schedule 1 (for hobby income) depending on your filing situation.

The IRS receives a copy of your 1099-K directly from the payment platform. If you file a tax return without including this income, it may trigger:

  • Automatic underreporting notices

  • IRS letters or audits

  • Late penalties and interest

It doesn’t mean you owe tax on the full amount — just that you need to account for it properly, including deductions if applicable.

Yes, if your side hustle qualifies as a business, you can deduct related expenses:

  • Shipping supplies

  • Website hosting

  • Marketing or ads

  • Home office

  • Mileage and travel

These deductions are reported on Schedule C, reducing your taxable income.

But if your activity is considered a hobby (no profit motive), you can’t deduct expenses. Be prepared to show that you’re actively trying to earn income.

The IRS looks at several factors:

  • Are you trying to make a profit?

  • Do you treat it like a business (track income, have a plan)?

  • Have you made a profit in 3 out of the last 5 years?

If the answer is yes, it’s likely a business and eligible for deductions. If not, it’s probably a hobby, and only income is reportable.

Case 1: Self-Employed Artist
Tina sells digital art through PayPal and gets $1,400 in payments. She receives a 1099-K.
She reports the full $1,400 on Schedule C and deducts $400 in software and equipment expenses.
Tina pays tax on the net $1,000.

Case 2: Casual Seller
Mark sells a used treadmill on Facebook Marketplace for $700. He paid $1,000 when he bought it new.
He receives a 1099-K. Mark documents the original cost and reports zero taxable income since he sold at a loss.

Just because you receive a 1099-K doesn’t mean all of it is taxable.
But you should:

  • Reconcile it with your own records

  • Review it for mistakes

  • Include it in your tax prep process

Also, check if your state requires additional reporting — some states have lower thresholds than the federal level.

  • January 31, 2026 – Payment platforms must send 1099-Ks

  • April 15, 2026 – Deadline to file your tax return

  • October 15, 2026 – Extended deadline (with Form 4868)

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