The 1099-K threshold moved 5 times in 5 years and finished where it started, and none of it changed what you owe

A seller in Porto asked me in March whether she would get a 1099-K for about 3 thousand dollars of Etsy sales, and I told her yes, because the 1099-k threshold I had learned was 600 dollars. I was wrong by a factor of more than thirty. The 600 dollar rule had been repealed 8 months before she asked, retroactively, and I had not noticed because the repeal arrived inside a large budget bill with a silly name.

She had already set money aside for a tax event that was not going to happen, and she had done it in the careful way that people do when they are frightened of a country's tax office and cannot ring it up at a sensible hour. That is the part I mind. This is the corrected version, and I am writing it as much for me as for you. The number is back to where it started. A third party settlement organisation has to send you the form only when your gross payments pass 20 thousand dollars and your transaction count passes 200, and both tests have to be met rather than either one. A US account is usually the next step after this form, and Bank Index lists the banks with their supervisors.

I went looking for the full history afterwards, because I wanted to know how I had missed it, and the history turned out to be worse than my memory: 5 separate settings of a single number, 3 of which never governed a full filing season. The threshold has changed five times in five years. It has been 20 thousand, then 600, then delayed twice, then 5 thousand, then 2,500, and now 20 thousand again. If you have felt confused about this, the confusion was earned, and anybody who told you the rule with confidence at any point in that stretch was quoting a number that had a shelf life measured in months rather than in years.

The five year tour of one number

The original rule sat in section 6050W and asked for both a dollar amount over 20 thousand and more than 200 transactions. The American Rescue Plan Act changed it in March 2021, cutting the figure to 600 dollars and removing the transaction count entirely, for calendar years beginning after the end of 2021.

Then nothing much happened, twice over. The agency looked at the size of the mailing it was about to send and decided, reasonably enough, that it would rather not send it yet. The IRS delayed the new threshold for 2022 in one notice and for 2023 in another. In November 2024 it published a phased plan instead. That notice set 5 thousand dollars for 2024 and 2,500 dollars for 2025, described those 2 years as “the final transition period”, and said that for years after 2025 the threshold would be 600 dollars in aggregate payments “regardless of the number of such transactions”.

None of that phased plan survived. The reconciliation act signed in July 2025 repealed the change outright, and the IRS description of the result is short: the law “retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021”. The updated answers appeared in a fact sheet dated 23 October 2025. The current instruction for the form, revised for 2026, states the test as payments that “exceed $20,000, and the total number of such transactions exceeds 200”.

The form was never the thing that decides what you owe

Every version of the panic I have answered since 2021 has the same shape underneath. Somebody believes that income becomes taxable at the moment a piece of paperwork arrives about it. It does not, and it never did. Your obligation to report what you earned does not depend on whether Etsy, Stripe or PayPal crossed a filing threshold, and the size of that threshold has nothing to do with the size of your bill.

What the threshold changes is the paperwork and the matching. When a filing is made, the agency holds a number it can compare against your return. When nothing is filed, the agency holds nothing, your income is exactly the same, and the only thing that changed is who is likely to notice a discrepancy. I keep meeting people who treat the second case as a gift, 3 or 4 of them in a bad month. It is a gift in the way that an unopened letter from a landlord is a gift, and the relief it produces is borrowed against a conversation that has not been cancelled, only postponed until somebody with a spreadsheet gets round to it.

The number they send will not match your books

This is the practical part, and it is the one that eats an evening every February. I suspect it causes more anguish than the threshold ever did, because the threshold is an argument about politics while this is an argument with a number that is sitting in front of you and appears to say you earned more than you know you earned. Box 1a is gross. The instruction is explicit that it means the total dollar amount “without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, shipping amounts, or any other amounts”.

So the figure includes the platform's commission that you never saw. It includes shipping you collected and paid straight out again. It includes sales tax the marketplace took, in the states where the marketplace is the one remitting it. It includes an order that a customer returned in full three days later. The refund does not come back off the top line. It sits somewhere below, in a report you have to go and find.

Reconcile it once, in writing, and keep the working. Start from box 1a, subtract refunds and chargebacks, subtract platform fees, subtract shipping collected, subtract tax the platform remitted, and the remainder should be your gross sales. Save that page beside the statement. If a question ever arrives, the answer is a document you already wrote rather than an afternoon of scrolling through a payouts report that only shows the last few months.

Doing that once is dull. Doing it in a panic in April, from a payouts screen that has quietly rolled off the older months, is a different experience entirely, and I have sat with somebody doing exactly that while she tried to remember what a refund in November had been for. Box 3 is the transaction count, and the instruction says to enter “the number of payment transactions (not including refund transactions)”. So a heavily refunded month looks busier in box 1a than it does in box 3. Box 4 is tax withheld, which is empty for almost everybody and alarming when it is not. The instruction puts it plainly: “A payment made by a TPSO is a reportable payment potentially subject to section 3406 backup withholding”. It fills up when a taxpayer identification number is missing or does not match. The fix is to correct the number with the platform. Arguing about the deduction gets you nowhere, because the platform is following a rule rather than making a decision about you.

What a foreign owner of a US LLC actually faces

Here is where I see the most expensive confusion, and I had part of it wrong myself until I read the instruction properly. A payment settlement entity does not have to file the form for payments made outside the United States to an offshore account, provided it does not know the payee is a US person and it holds a Form W-8 or documentary evidence of foreign status. The W-8 has to be collected no later than 90 days after the contractual relationship starts.

That exception is about paying a foreign person at a foreign account. It is not about you. If your selling account belongs to a US limited liability company, the platform is paying a US person, you gave it a Form W-9 when you signed up, and the form will arrive with your company's name on it. Being a non-resident owner does not move the company out of that category.

None of this touches the filing that actually carries the frightening penalty for a foreign owned single member LLC, which is the information return that sits alongside a pro forma corporate return and starts at 25 thousand dollars if you skip it. A quiet year with no 1099-K is not a quiet year for that one. I have watched somebody conclude the opposite and I would rather nobody repeated it.

The state that ignores the federal number

States set their own reporting rules and they do not follow the federal figure. Massachusetts says its requirement “remains at $600 or more in gross payments, regardless of the number of transactions”, for anybody with an address in the state, filed by 31 January, with its own state version available to filers who meet the state test and not the federal one. Filers with more than fifty payees have to submit through the state system.

I am not going to list the others from memory, because that is exactly the habit that produced the wrong answer I gave in March. The general shape holds: some states sit well below 20 thousand dollars, and a seller with a US address in one of them can receive a form while a seller with a foreign address and the same sales receives nothing.

A short digression about the phrase third party settlement organisation

The term does real work and almost nobody outside tax offices knows it. Card acquirers report under a different limb of the same section, with no de minimis threshold at all, which is why a merchant taking cards has always received a form regardless of size while an Etsy seller argued about 600 dollars. The instruction also notes that when payments fall under section 6050W rather than the ordinary information reporting sections, the de minimis threshold “is disregarded” for that purpose. Anyway, back to the seller in Porto.

What I could not establish

How many sellers received forms for 2024 and 2025 under thresholds that were later repealed. Those years were governed by the transition notice while it was in force, and I do not know whether platforms that had already filed at 5 thousand dollars went back and corrected. I asked two people who run marketplace accounts and got different answers, which usually means nobody has looked. My guess is that most platforms left the filed forms alone and moved on, since a correction costs them work and helps nobody who is paying attention, but I would not put that in front of an accountant as a finding.

Whether the 200 transaction test rescues anybody in practice. I doubt it does often. A seller with 40 thousand dollars of sales across 60 large orders meets the dollar test and fails the count test, and on the face of the statute receives nothing. I cannot tell you how platforms handle that edge. Their published help pages describe the dollar figure and go quiet about the count.

What I keep thinking about is the cost of the 5 changes rather than the level of any one of them. Either level is defensible on its own, and reasonable people have argued for both of them for years without either side being obviously wrong. Moving between them five times in five years taught a great many very small sellers that the rules are weather, and nobody I asked will say what that does to voluntary compliance over a decade, which is the trouble with treating a reporting rule as a thing you can keep adjusting.