Most taxpayers likely didn’t receive Form 1099-K, Payment Card and Third Party Network Transactions, this filing season for the sale of goods or services through a third-party network, but things will change. In 2021, Congress passed the American Rescue Plan Act of 2021 (ARPA), which substantially lowered the filing threshold in IRC § 6050W(e) for issuing Form 1099-K from a total amount exceeding $20,000 from over 200 transactions to gross payments exceeding $600 with no minimum transaction requirement. The IRS delayed implementation of this rule in 2022 and again in 2023. However, this reporting delay is temporary, as the IRS plans on using a phased-in approach starting in 2024. However, whether you receive a Form 1099-K or not, the income from the sales of goods or services is taxable, and you will need to include it on your tax return. In 2025, the IRS will require third-party payment networks to send taxpayers Form 1099-K if their transactions meet the new $5,000 threshold set by the IRS for transactions in 2024.
Third-party payment networks or platforms, also called third-party settlement organizations, might include:
- Auction sites;
- Car sharing or ride-hailing platforms;
- Craft or maker marketplaces;
- Crowdfunding platforms;
- Freelance marketplaces;
- Online marketplaces (sale or resale of clothing, furniture, and other items);
- Peer-to-peer payment platforms or digital wallets;
- Real estate marketplaces; or
- Ticket exchange or resale sites.
Figure 1 (illustrates the different dollar thresholds for 2023 and beyond)
| Tax Year 2023 | Tax Year 2024 | ARPA Requirements (Implementation Date Undetermined) | |
|---|---|---|---|
| Threshold | $20,000 | $5,000 | $600 |
| Minimum Transaction Requirement | At least 201 transactions | None | None |
The devil’s in the details, but you got a friend in me. It is important to note that this doesn’t mean you won’t receive Form 1099-K; it only means the IRS does not yet require the third-party settlement organizations to issue this form unless the taxpayer meets the current thresholds. The third-party settlement organizations could nonetheless still issue you a Form 1099-K. It is important to remember whether you receive a Form 1099-K or not, the income from the sales of goods or services is taxable, and you will need to include it on your tax return.
Reselling Hot Concert Tickets in 2024 May Result in Receiving Form 1099-K in the 2025 Filing Season
Once the IRS begins to phase in the new Form 1099-K thresholds, taxpayers may receive Forms 1099-K for activities like reselling concert tickets. Let’s use Taylor Swift’s 2023 tour as an example because tickets to The Eras Tour resold for such high prices. (Note: Because the IRS delayed implementation of the new law in 2023, you probably did not receive Form 1099-K for reselling tickets in 2023; we are just using The Eras Tour tickets to illustrate how the phased-in approach will work.)
Some people reported purchasing tickets to this concert for $800 each and then reselling them through third-party settlement organizations for $5,000 or more! If there’s a similar ticket scenario in 2024, it’s possible the transaction will meet the IRS’s $5,000 threshold, causing the third-party settlement organizations to issue Form 1099-K to the taxpayer and file a copy with the IRS in 2025.
This is just an example of how certain transactions will generate the issuance of Form 1099-K in the future. During 2024, you’ll want to think about your third-party settlement organization transactions in case they generate the issuance of Form 1099-K. If they do, You Need to Calm Down! You’ve Got No Reason to Be Afraid, but Don’t Leave a Blank Space. Here’s what to do instead:
- Include in income the total gross amount shown in Box 1a of the Form 1099-K; and
- Offset all non-taxable amounts so that you calculate the correct net taxable income (if any). This would include deducting from the sale price the amount you originally paid for the ticket as well as fees, refunds, or chargebacks.
Conclusion
Although the IRS has again extended implementing the new rules for issuance of Form 1099-K when taxpayers use a third-party settlement organization to sell goods or services, a phased-in implementation is just around the corner. Remember, the IRS has delayed implementation of the new ARPA Form 1099-K rules. So, if you used a payment app or online marketplace and received over $20,000 from over 200 transactions, that threshold still applies for 2023 transactions. However, the IRS will begin implementing a phased-in approach in 2024. This means in 2024, everyday transactions that previously didn’t generate the issuance of Form 1099-K may do so and could be reported to the IRS in January 2025.
Taxpayers and tax professionals need to familiarize themselves with the rules and understand how to report Form 1099-K income. So here’s the bottom line: the threshold for when a third-party settlement organizations must issue Form 1099-K will remain the same for 2023, but a lower phase-in threshold will apply for 2024 transactions. Before year end, the IRS will likely issue new IRS guidance on this phased-in implementation so stay tuned to the Form 1099-K FAQs on IRS.gov.
This won’t last Forever & Always!
Read Part One: An Introduction to Tax Forms for Gig Economy Workers
(Although there are references to Taylor Swift’s The Eras Tour and some of her songs in this blog, neither the IRS nor TAS are endorsing this artist; references to her work are to illustrate how you might receive a Form 1099-K in 2025 that you weren’t expecting.)
