What’s Next for Cash App, Venmo Users and IRS Reporting Rules

A recent delay in what e-commerce companies like eBay Inc. and Venmo must report to the IRS doesn’t change what millions of Americans must pay taxes on.

Taxpayers who use e-commerce platforms like PayPal, Cash App, and Etsy were set to receive a 1099-K tax form—some for the first time—early next year for their business transactions on the platforms. But now, many of them won’t receive the form until the 2026 filing season.

The IRS will phase in the requirement for e-commerce platforms to send a copy of the 1099-K information return to taxpayers who have over $600 in business transactions, a requirement that initially was designed to capture taxes from gig workers. That threshold is a steep dip from the prior requirement of $20,000 and 200 transactions.

Here’s what taxpayers need to know about the new IRS guidance on 1099-K forms.

What does this mean to the average taxpayer using Venmo?

Generally, all income still must be reported on a tax return and is taxable. The 1099-K form—an information return that compiles gross payments made on platforms—helps taxpayers report the income they’ve made over the past year.

Gig workers and freelancers are no strangers to reporting their income to the IRS using this form, but small casual sellers may be caught off guard when the new $600 requirement takes effect. For many, that won’t be until at least the 2026 filing season.

For the 2024 filing season, taxpayers who have more than $20,000 and over 200 business transactions will receive a 1099-K form from each platform they use, aligning with the requirements prior to the 2021 Covid-19 relief law.

For the 2025 filing season, taxpayers who have over $5,000 in business transactions will receive forms.

Some states such as Massachusetts, Vermont, Virginia, and Maryland have their own $600 reporting requirement that taxpayers may need to consider during the 2024 and 2025 tax filing seasons.

What does this mean for personal transactions?

The reporting requirement is only meant to track business transactions where a customer uses the e-commerce platforms to make money, such as a coffee shop that uses Square Inc. to accept credit card payments or a dog breeder who uses PayPal to accept adoption fees.

Personal transactions like accepting a roommate’s half of the rent or paying friends back for dinner are considered “friends and family transactions” that aren’t taxable. Some platforms such as Venmo and PayPal give users the option to select whether a transaction is business or personal before sending out a 1099-K.

For other companies, the type of transaction may be less clear and taxpayers may receive a 1099-K when they don’t have additional income they need to report. Some companies may send a 1099-K regardless of whether transactions are above the threshold.

It gets even more complicated when a taxpayer sells a good for a loss, such as when a football season ticket holder sells one ticket for less than what they paid. A personal good sold at a loss isn’t deductible and should still be reported on the tax return.

Tax professionals recommend taxpayers keep documents tracking their sales and other transactions.

There is an error on my 1099-K. What should I do?

With the eventual surge of 1099-Ks going to taxpayers, many tax professionals said the forms will have errors.

Taxpayers with incorrect information will need to request a corrected form from the company; if they can’t get one, they will have to note the error on their return, the IRS said.

But tax professionals said the companies might not be able to manage the influx of questions from taxpayers, especially since some customer service representatives will be fielding tax questions for the first time.

These e-commerce platforms won’t be handing out tax advice either—they’ll defer to the IRS and tax professionals.

Does the IRS have the authority to make these changes?

Agency officials cited the Internal Revenue Code giving broad discretion to the IRS to administer tax laws when they were asked whether the IRS is allowed to delay the requirements laid out in the law and change the threshold in a transition period.

Following the announcement, Republicans were quick to doubt the IRS’s authority. Ways and Means Chair Jason Smith (R-Mo.) said in a Tuesday statement that it’s “unlikely the move is even constitutional.”

Lawmakers last year tried to delay the requirement through legislation, though they couldn’t agree on whether to push the change to take effect for the 2024 or 2025 filing season.

What is Congress doing about it?

There’s bipartisan agreement that the threshold should go up, but lawmakers differ on what exactly the new one should be.

Reps. Chris Pappas (D-N.H.) and Dan Kildee (D-Mich.) proposed the $5,000 minimum, which the IRS has now settled on for the transition year. Republicans, on the other hand, have endorsed Miller’s bill that goes back to the previous $20,000 and 200 transactions.

The Miller legislation has backing from a broader set of House Republicans, with Ways and Means GOP members advancing legislation in June that included her bill.

There’s also a bipartisan approach on the table. Sens. Sherrod Brown (D-Ohio) and Bill Cassidy (R-La.), are pushing to institute a $10,000 minimum.

Any legislative fix, though, likely relies on Congress coming together on a larger, bipartisan tax deal. Tax legislation is typically passed in end-of-year extender packages.

Lawmakers have until the end of 2025 to prevent the $600 threshold from taking effect.