Gig Economy Tax Bill Reinstates $20,000 Threshold: No 1099-K for Small Sellers Starting 2025

The Saving Gig Economy Taxpayers Act is straightforward: it reverses a major tax reporting change that was coming for anyone who sells goods or services online via platforms like PayPal, Venmo, or Etsy. Starting with the 2025 tax year, these third-party payment networks will only be required to send you and the IRS a Form 1099-K if you hit the old, higher reporting threshold of $20,000 in payments AND more than 200 separate transactions in a calendar year. If you don't hit both of those numbers, the platform doesn't report your earnings.

The Return of the $20,000 Ceiling

This bill is essentially hitting the rewind button on the reporting rules for gig workers and casual sellers. Previously, the IRS had lowered the reporting threshold dramatically, meaning many people who sold a few items on eBay or did occasional freelance work would suddenly receive a 1099-K for just a few hundred dollars. This bill scraps that lower threshold entirely. For the average person, this means less administrative hassle and fewer confusing tax forms landing in your mailbox if your side hustle or casual sales are truly small-scale. Consider a parent who sells $1,500 worth of old baby gear and household items online in 10 transactions—under this new rule (effective 2025), they won't get a 1099-K, saving them the headache of figuring out how to report that income (though, legally, the income is still taxable).

What About Backup Withholding?

The bill also clarifies how this threshold applies to backup withholding, which is when a payment platform holds back a portion of your payment and sends it directly to the IRS if you haven't provided a valid taxpayer ID number. Section 3 of the Act applies the same $20,000/200 transaction rule to determine if a payment is “reportable” for backup withholding purposes. If you don't meet both thresholds, the network isn't required to withhold funds. There’s one key exception: if the network reported payments for you last year, they have to keep reporting this year, even if you fall below the thresholds. This prevents established sellers from skirting the rules by dropping their transaction count slightly.

The Trade-Off: Transparency vs. Compliance Relief

While this change is a huge administrative win for millions of small-scale sellers and payment processors, it creates a transparency issue for the IRS. By raising the bar so high, the government loses visibility into a vast ocean of transactions that fall between, say, $1,000 and $19,999. This income is still taxable, but without the mandatory 1099-K reporting, the IRS has to rely on individuals to accurately report it themselves. For the tax enforcement side, this is a clear loss of automated oversight, which could impact overall tax compliance.

On the flip side, some individuals might find the lack of a 1099-K form inconvenient. If you are a legitimate small business owner or freelancer who earns around $15,000 a year through a platform, you might need that 1099-K to prove your income for things like loan applications or subsidized health insurance. Without the form, you’ll have to rely solely on your own records and bank statements, which can add complexity when dealing with official paperwork.