The "Red Tape Reduction Act of 2025" reinstates the previous IRS de minimis exception for third-party payment platforms like PayPal and Venmo, so they only have to report users' business transactions exceeding $10,000 or 50 transactions, effective after 2024.
Bill Cassidy
Senator
LA
The "Red Tape Reduction Act of 2025" reinstates a de minimis exception for third-party settlement organizations, requiring them to report information only if transactions exceed $10,000 or 50 transactions. It also aligns backup withholding rules with these thresholds, ensuring consistency in reporting requirements for third-party network transactions. These changes are effective for transactions and calendar years after December 31, 2024.
Bill Proposes Raising Online Payment Reporting Threshold Back to $10,000, Reducing 1099-K Forms
The "Red Tape Reduction Act of 2025" aims to change when platforms like PayPal, Venmo, or Etsy have to report your earnings to the IRS. This bill proposes rolling back the reporting threshold for these third-party payment networks, moving it from the recently implemented $600 level back up to the previous standard: $10,000 in total payments or more than 50 transactions within a calendar year. This change, detailed in Section 2, would apply to transactions settled after December 31, 2024.
Back to the Future for Your Side Hustle Cash?
Remember the recent buzz about getting a tax form (Form 1099-K) if you sold more than $600 worth of stuff online or got paid for gigs through an app? That rule came from the American Rescue Plan Act. This new bill essentially hits the undo button, reinstating the older, higher limits found in Section 6050W(e) of the tax code. So, if you occasionally sell crafts online or have a small side project, you'd likely see fewer 1099-K forms hitting your mailbox. For instance, selling $1,500 worth of goods over 30 transactions wouldn't trigger a report under this bill, whereas it currently does.
Less Paperwork, But What About Taxes?
Fewer automatic reports mean less paperwork for casual sellers and the payment platforms themselves. However, it's crucial to understand this doesn't change what income is taxable. You're still legally required to report all your income to the IRS, whether you receive a 1099-K or not. This bill just changes whether the IRS gets an automatic heads-up from the payment platform below that $10,000/50 transaction threshold. Section 3 also adjusts the rules for backup withholding – where platforms might have to withhold taxes if your tax info is incorrect – aligning it with these higher reporting limits. Essentially, if your transactions don't meet the $10,000 or 50-transaction mark, backup withholding generally won't apply solely based on those payments, unless you were already subject to reporting in the prior year.