Beginning Jan. 1, 2024, these thresholds dropped significantly. With the change, payment platforms (like PayPal®, Square®, Venmo, etc.) must report payments totaling $5,000 or more in a calendar year, with no transaction minimum. This is part of a phase-in process by the IRS to eventually implement the $600 threshold originally brought about by the American Rescue Plan. As of November 2024, the IRS has issued new guidance for tax years 2025 and 2026 — the 1099-K threshold will drop to $2,500 in 2025 and finally $600 in 2026 unless the IRS makes more changes.

If you meet the applicable threshold, you’ll receive Form 1099-K from a payment app or online marketplace. This is an informational tax document detailing the gross amount of all your reportable transactions.

The IRS also announced that the $600 threshold will also be phased in. For 2024, the IRS is planning for the reporting threshold to be $5,000.

As with last year, this means that individuals who used a third-party payment network (such as Venmo, Cash App, Zelle, PayPal, or Apple Pay) to sell goods or to receive income for providing services under $20,000 and had less than 200 transactions during 2023 should not receive a Form 1099-K (Payment Card and Third-Party Transactions) in early 2024.

Will I need to pay tax on my transactions if I only use payment apps for personal payments?

The new 1099-K reporting requirements will only impact individuals who have made a profit by selling goods and services while receiving compensation through payment card transactions (debit or credit card) or by using third-party payment networks such as PayPal or similar apps.

If you solely use payment apps for personal transactions between family and friends — like splitting the rent or sharing expenses during a night out — then you don’t have to worry about it. This isn’t a new tax on all transactions made through these apps, it’s simply a report of all your transactions, taxable or not. Some apps offer a “friends and family” category that helps avoid flagging personal transactions as business payments.

What happens if a payment app sends me a 1099-K for a nontaxable transaction?

Even though personal transactions between friends and family don’t need to be reported, you may receive a 1099-K from a payment service app for nontaxable transactions. Since this is just an informational document, it doesn’t need to be included with your tax return.

Self-employed people may also find they don’t need their 1099-K. Freelancers who use these apps as payment processors, for example, might get a 1099-K from the payment app as well as a 1099-NEC from their client for the same transaction. In this case, you won’t need to report the income twice.

The IRS leaves it up to you, the taxpayer, to determine which payments are taxable and which aren’t. Generally, you will only owe income tax if you made a profit on the transaction, like selling a personal item for a gain. To limit the possibility of incorrect tax reporting, always make sure to keep your personal and business transactions separate on payment apps and don’t accept any nontaxable payments via debit or credit cards when possible.

If you want to read up on this issue further, check out this helpful 1099-K FAQ page from the IRS

For Reference:

• For TY 2024, 1099-K income that must be reported on a return:
  • Amounts from selling goods for a business and/or providing services
  • Income received from renting property
  • Selling personal items at a gain
• 1099-Ks for sale of personal items at a loss – or when an individual receives a 1099-K in error – should be reported on Form 1040, Schedule 1.

The IRS has made a variety of other changes that may affect your tax liability for tax year 2024.

New tax threshold on capital gains. 
Capital gains taxes are levied on the sale of capital assets, such as stocks, bonds, valuable items like jewelry and real estate. For the 2024 tax year, individual tax filers will not have to pay any capital gains tax if their total taxable income is $47,025 or less. That’s an increase from the income threshold of $44,625 in 2023. The capital gains tax rate jumps to 15% if your income is $47,026 to $518,900. If your income is higher than that, you’ll pay 20% in capital gains if you sell your investments.

Flexible spending account increases. 
The dollar limit for flexible spending accounts (FSA) increases to $3,200 in 2024. If you don’t use all the money in your FSA and your plan allows you to carry over unused amounts, you can carryover up to $640 in this tax year.

Health savings account deductible increases. 
To qualify for a health savings account (HSA) in 2024, participants’ insurance plans must have an annual deductible between $2,800 and $4,150 for individuals, with a maximum out-of-pocket expense amount of $5,550. For family coverage, the annual deductible must be between $5,550 and $8,350, with an out-of-pocket expense limit of $10,200. If you participate in an HSA plan, you can contribute more to your plan this year: up to $4,150 for individuals and up to $8,300 for families.

Increased foreign earned income exclusion. 
If you earn income in a foreign country or from an employer in a foreign country, you may benefit from the foreign earned income exclusion, which increased to $126,500 in 2024.

Estate exemption increase. 
If a family member dies during 2024, their estate has a basic estate tax exclusion amount of $13.6 million, an increase from $12.92 million for estates owned by people who died in 2023.