The SNOOP Act of 2025 reinstates the previous IRS exception for minimal payments, requiring third-party payment processors to report transactions only if they exceed $20,000 and involve more than 200 transactions.
Bill Hagerty
Senator
TN
The SNOOP Act of 2025 amends the Internal Revenue Code, reinstating the previous exception for minimal payments handled by third-party settlement organizations, requiring them to report information only if the total amount exceeds $20,000 and the number of transactions exceeds 200. It also modifies backup withholding rules for third-party network transactions, aligning them with the reinstated de minimis standards. These changes are set to take effect for calendar years starting after December 31, 2024.
SNOOP Act Aims to Roll Back Online Payment Reporting Threshold to $20,000 and 200 Transactions
The "Stop the Nosy Obsession with Online Payments Act of 2025," or SNOOP Act, is looking to change how income from platforms like PayPal, Venmo, or Etsy gets reported to the IRS. It essentially hits rewind, aiming to reinstate the previous, higher thresholds for tax reporting by these third-party payment networks. If enacted, these platforms would only need to send out a Form 1099-K if someone receives over $20,000 and has more than 200 transactions in a year, reversing a recent change that significantly lowered this bar.
Back to the Future for 1099-Ks
Remember when you only got a tax form from your side hustle platform if you were really pulling in significant cash? Section 2 of this bill wants to bring that back. It amends the Internal Revenue Code (specifically Section 6050W(e)) to restore the reporting threshold that was in place before the American Rescue Plan Act. This means platforms that process payments for goods and services – think selling crafts online, freelancing gigs, or reselling items – wouldn't have to issue a 1099-K tax form unless both conditions are met: total payments exceeding $20,000 and the total number of transactions exceeding 200 within the calendar year. For many casual sellers or those with small side gigs, this could mean less paperwork and confusion come tax time, as the much lower $600 threshold implemented previously would be eliminated.
Aligning Backup Withholding Rules
Section 3 tackles a related issue: backup withholding. This is when a payment platform is required to withhold income tax (currently at 24%) from payments if certain conditions aren't met, like providing a correct Taxpayer Identification Number. The SNOOP Act aligns the rules for backup withholding (Section 3406(b) of the tax code) with the proposed higher reporting thresholds. Essentially, the requirement for backup withholding on these types of payments would generally only kick in if the payments are also high enough to require a 1099-K under the reinstated $20,000/200 transaction rule. This change is slated to apply to calendar years starting after December 31, 2024.
What This Means for Your Digital Wallet
In practical terms, this bill aims to reduce the tax reporting burden for individuals and small businesses using online payment networks for relatively small amounts of income. If you occasionally sell things online, do a few freelance projects, or use these platforms for similar income-generating activities, you'd be less likely to receive a 1099-K form unless your activity reaches the higher $20,000 and 200-transaction levels. This effectively returns the reporting requirements to the standard that existed for many years, potentially simplifying tax filing for millions who engage in casual online commerce or gig work.