The $600 Tax Rule Is Dead—What Changed in 2026
Here’s the truth: the $600 tax rule you’ve been hearing about for years never actually happened.
If you’ve been dreading a flood of tax forms from Venmo or PayPal, breathe easy. The One Big Beautiful Bill Act rolled back the controversial $600 reporting threshold in July 2025. The rule is officially dead.
What You Need to Know Right Now
The $600 IRS reporting requirement that was supposed to start in 2026 got permanently scrapped. Payment apps like Venmo, PayPal, Cash App, and online marketplaces like eBay or Etsy now follow the old rules from before 2021.
Bottom line: You’ll only get a Form 1099-K if you receive over $20,000 in payments AND have more than 200 transactions in a calendar year.
This is a massive shift from what was planned. The original threshold of $600 (with no transaction minimum) would have meant millions of Americans getting unexpected tax forms for side hustles, gig work, or even selling used furniture online.
What You Came to Know
The $600 Rule That Never WasThe $600 rule came from the American Rescue Plan Act of 2021, which eliminated the transaction requirement and dropped the reporting threshold to just $600.
The IRS delayed this change multiple times. For 2024, the threshold was $5,000, then planned to drop to $2,500 for 2025, and finally to $600 for 2026.
But on July 4, 2025, the One Big Beautiful Bill Act retroactively reinstated the old $20,000 and 200 transaction threshold.
How the Current Rules Work in 2026
Third-party settlement organizations are not required to file Forms 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.
You need to meet both conditions. If you make $25,000 but only have 150 transactions, you won’t get a 1099-K. If you have 250 transactions but only made $15,000, you won’t get one either.
This applies to platforms like PayPal, Venmo, Cash App, eBay, Etsy, StubHub, Ticketmaster, and similar payment apps or online marketplaces.
What About Payment Card Transactions?
Different rules apply for credit and debit card payments.
There is no threshold amount for payments received through payment cards—if you received even $0.01 from a payment card transaction, you should receive a Form 1099-K.
This means businesses that accept credit cards still get 1099-K forms for all card transactions, regardless of amount.
What You Must Know
You Still Owe Taxes on All Income
Here’s what most sites won’t tell you: All taxable income must be reported, even if you don’t receive a form.
The absence of a 1099-K doesn’t mean your income is invisible to the IRS. You’re legally required to report every dollar you earn from selling goods or providing services.
💡 Pro Tip
Even if you fall below the $20,000/200 transaction threshold, keep detailed records of all your income and expenses. The IRS can still audit you, and without documentation, you could face penalties for underreporting income—even if the platform never sent you a 1099-K.
State Rules May Be Different
Not every state follows federal thresholds.
Maryland, Massachusetts, Vermont, Virginia, and Washington D.C. have moved the threshold to $600. Other states may have their own requirements.
Check your state revenue department’s website to see if you’ll receive state-specific 1099-K forms.
Personal Payments Are Excluded
Splitting dinner bills with friends? Reimbursing someone for concert tickets? Getting birthday money from family?
Payments between friends and family that aren’t for goods or services typically aren’t reportable.
Most payment apps have a “friends and family” option. Use it. Transactions marked as “goods and services” count toward your 1099-K threshold.
You Might Still Get a Form
Payment platforms may still send a Form 1099-K for payments below the federal thresholds.
Some platforms built their systems around the old $600 threshold and haven’t updated yet. Others have their own internal reporting policies.
If you get a 1099-K for non-business payments (like someone accidentally marking a personal payment as “goods and services”), you’ll need to document that it’s not taxable income.
What to Do Next
Keep Accurate Records
Track every payment you receive for business purposes. Document:
Income sources – Which platforms you use and how much you earn on each
Business expenses – Shipping costs, supplies, platform fees, advertising
Personal vs. business – Keep them completely separate
Understand What’s Taxable
Form 1099-K reports your gross payments—the total you received before any deductions.
It doesn’t subtract processing fees, refunds issued, shipping costs, discounts, or other adjustments, even though these are not taxable income.
You report the gross amount, then deduct legitimate business expenses to calculate your actual taxable income.
Selling used furniture for less than you paid? Not taxable. Selling vintage items you found at a garage sale for profit? That’s taxable income.
Separate Business and Personal Accounts
Open dedicated business accounts on payment apps. This prevents personal payments from getting mixed with business transactions and triggering unnecessary 1099-K forms.
Watch for Form Errors
If you receive a 1099-K that’s incorrect:
Contact the platform immediately to request a corrected form
Document everything – Save emails, screenshots, receipts
Report correctly on your tax return, even if the form is wrong
Real-World Impact
The rollback means millions fewer tax forms will be issued. Fully implementing the $600 threshold would have resulted in an additional 30 million Forms 1099-K issued annually.
For gig workers, casual sellers, and freelancers, this reduces paperwork. But it also means more responsibility falls on you to track and report your income correctly.
Tax professionals can now focus on actual business income instead of one-time used couch sales or occasional Etsy transactions.
FAQs About the $600 Tax Rule in 2026
Q: Is the $600 tax rule in effect for 2026?
No. The $600 threshold was permanently repealed by the One Big Beautiful Bill Act in July 2025. The threshold is now $20,000 and 200 transactions.
Q: Do I need to report income if I don’t receive a 1099-K?
Yes. All taxable income must be reported on your tax return, regardless of whether you receive a form.
Q: What counts as a business transaction vs. a personal payment?
Business transactions are payments for goods you sold or services you provided. Personal payments include gifts, reimbursements, and splitting bills with friends.
Q: Will Venmo and PayPal still report my income?
Only if you receive over $20,000 in business payments AND have more than 200 transactions in a calendar year. Personal payments marked “friends and family” don’t count.
Q: What if my state has a $600 threshold?
Some states have lower thresholds than the federal government. You may still receive a state-issued 1099-K even if you don’t meet the federal threshold.
Disclaimer
The information in this article about the $600 tax rule and 1099-K reporting requirements is for general educational purposes only and does not constitute legal or tax advice. Tax laws and IRS reporting thresholds vary based on individual circumstances, transaction types, and state jurisdiction. AllAboutLawyer.com does not provide tax preparation services, accounting services, or personalized tax consultations. The IRS regulations regarding Form 1099-K, payment app tax reporting, and business income filing requirements are subject to change. For specific guidance on your tax reporting obligations, deductible business expenses, or questions about the $600 threshold rollback under the One Big Beautiful Bill Act, consult a qualified tax professional, certified public accountant, or contact the IRS directly at IRS.gov.
Need more tax guidance? The IRS provides comprehensive information about Form 1099-K reporting at https://www.irs.gov/newsroom/form-1099-k-faqs with updated FAQs and official guidance on the current thresholds.
Stay informed, stay protected. — AllAboutLawyer.com
This article provides general tax information only and is not legal or tax advice. Please consult a qualified tax professional or the IRS for guidance on your specific situation.
Last Updated: January 28, 2026 — We keep this current with the latest legal developments
About the Author
Sarah Klein, JD, is a former consumer rights attorney who spent years helping clients with issues like unfair billing, product disputes, and debt collection practices. At All About Lawyer, she simplifies consumer protection laws so readers can defend their rights and resolve problems with confidence.
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