The One Big Beautiful Bill Act (OBBBA), effective July 4, 2025, brings important updates to how income is reported using Form 1099. These changes affect gig workers, self-employed individuals, and anyone using payment apps or online marketplaces for business purposes—including platforms like PayPal, Zelle, and others.
Key Changes to Form 1099 Reporting
Form 1099-K (Payment Apps and Credit Card Transactions)
- The law restores the original threshold of $20,000 in payments and 200 transactions.
- This replaces the lower $600 threshold that was scheduled to take effect.
- The updated threshold applies starting with the 2025 tax year.
Form 1099-MISC (Miscellaneous Income)
- Used to report attorney fees, royalties, prizes, awards, and certain rents.
- The reporting threshold will rise from $600 to $2,000, beginning with the 2026 tax year.
- This threshold will adjust annually for inflation starting in 2027.
Form 1099-NEC (Nonemployee Compensation)
- Used to report payments to independent contractors and gig workers.
- The threshold also increases from $600 to $2,000, starting with the 2026 tax year.
- Inflation adjustments will begin in 2027.
What This Means for You
These updates are expected to reduce the number of 1099 forms issued. However, it is important to remember: all taxable income must still be reported, even if you do not receive a Form 1099. This includes income from freelance work, side businesses, online sales, or payment apps. If you earned income, it must still be reported—even if no 1099 arrives in your mailbox.
If you have questions about how these updates affect your reporting or tax obligations, our team is here to help.
Source: https://www.forbes.com/