What Taxpayers Should Know About Big Changes to Form 1099-K Reporting
KANSAS CITY, Mo., Jan. 22, 2025 — The millions of Americans with revenue-generating side hustles and casual sellers may be in for a big surprise this January — an unexpected tax form called the 1099-K. Payment platforms, apps, and online marketplaces are required to issue a Form 1099-K to anyone who received $5,000 or more in payments on any single platform in 2024 to include with their tax return this tax season.
This represents a significant change from the previous threshold. Previously, 1099-Ks were only sent to individuals who received more than $20,000 and had more than 200 transactions on any platform. The IRS has indicated that the reporting threshold will continue to decrease in the upcoming years and anticipates that this will affect roughly 20 million people over the next two years.
Implications for Side-Hustlers and Casual Sellers
What do these changes mean for taxpayers and the rapid growth of the side-hustle economy? Many Americans are exploring ways to supplement their income to cover expenses and pursue their aspirations. Some individuals are reselling popular concert tickets or used designer items. Others engage in selling handmade products through online platforms or drive for rideshare services. The change surrounding the 1099-K means that these casual online sellers, gig workers, freelancers, and small business owners whose online transactions crossed the new reporting threshold for the first time in 2024 might face a complicated tax filing process.
Recent data indicates that GenZ is the generation most likely to depend on multiple income streams derived from various revenue-generating activities, predominantly online. These individuals now face a critical need to accurately account for and report their income to comply with the updated IRS regulations.
Many people may not realize that as gig workers, they are considered small business owners in the eyes of the Internal Revenue Service. This classification brings with it additional tax rules and increases the likelihood of IRS audits and correspondence, complicating the tax filing process. Whether the gig revenue serves as the primary income source or functions as a supplementary side hustle, these individuals now carry more responsibilities and requirements that could result in increased interaction with the IRS and state revenue offices.
