SNOOP Act Reinstates $20,000/200-Transaction Tax Reporting Threshold for Venmo and PayPal

The Stop the Nosy Obsession with Online Payments Act of 2025, or the SNOOP Act, is all about rolling back how the IRS tracks your side hustle money. For the last few years, the government has been trying to implement a rule that would force third-party payment apps like PayPal, Venmo, and Cash App to report any business transactions over a low threshold (like $600) to the IRS. This bill effectively slams the brakes on that, reinstating the much higher, older reporting rule: processors only have to send you a 1099-K form if you receive over $20,000 AND have more than 200 separate transactions in a single year (SEC. 2).

The Retroactive Rollback: Less Paperwork for Casual Sellers

This change is a big deal, especially for people who sell things online casually. Think about the person cleaning out their garage on eBay, the crafter selling custom goods on Etsy, or the small business owner who takes Venmo for services rendered. Under the lower threshold, many of these folks would have received a 1099-K, even if their profit was negligible or the sales were just to cover costs. The SNOOP Act eliminates that administrative headache for millions of users. Crucially, this change is retroactive, meaning it applies as if the higher limit had never been changed in the first place (SEC. 2).

For example, if you ran a small side business making $15,000 from 150 transactions last year, you wouldn't get a 1099-K under this new rule. That’s a huge relief for anyone who found themselves suddenly dealing with complex tax forms for relatively small amounts of income. The clear benefit here is less paperwork and less confusion for the everyday person trying to earn a little extra cash.

Who’s Watching the Books Now?

While the relief on paperwork is real, the flip side is that this dramatically reduces the IRS’s visibility into the small business and gig economy. When the reporting threshold is high ($20,000 and 200 transactions), it means millions of smaller transactions—which are still taxable income—now go unreported to the IRS by the payment processor. This doesn't mean the income isn't taxable; it just means the IRS won't automatically know about it. For the government, this is a significant loss of data that helps them spot potential underreporting. The general public ultimately bears the cost of reduced tax compliance, as tax gaps often translate into reduced services or the need for higher taxes elsewhere.

The Backup Withholding Loophole

Section 3 of the bill deals with backup withholding—that’s when the IRS requires a payer (like the payment app) to automatically take out taxes because the recipient hasn't provided a correct Taxpayer Identification Number or has underreported income previously. The SNOOP Act makes it harder to trigger this withholding on network payments. Now, for the payment to be considered “reportable” for backup withholding purposes, you must hit both the dollar amount and transaction count thresholds in the same year (SEC. 3).

However, there’s a catch that keeps the system from completely resetting every year: if you did meet both the $20,000 and 200-transaction threshold in the previous year, the payment network must continue treating your payments as reportable this year, even if you fall below the limits. In other words, once you cross the line and show you’re a high-volume seller, you stay on the reporting list. This provision, which applies to calendar years starting after December 31, 2024, adds a layer of complexity but ensures that consistent, high-volume sellers remain visible to the IRS.