On November 21, 2023, the IRS announced — for the second consecutive year — that it would delay the implementation of the reduced Form 1099-K reporting threshold. Instead of the $600 threshold enacted by the American Rescue Plan Act of 2021, the IRS will use a $5,000 transitional threshold for calendar year 2024 and will phase in the lower threshold over subsequent years. For 2023, the pre-ARPA threshold of $20,000 and 200 transactions will continue to apply.[1]
This is the second delay in as many years, and it reflects the practical challenges of implementing a reporting threshold that would dramatically increase the volume of information returns while catching millions of casual sellers unaware of their reporting obligations.
Background: The $600 Threshold
Form 1099-K is filed by payment settlement entities — primarily payment card networks (Visa, Mastercard) and third-party settlement organizations (PayPal, Venmo, eBay, Etsy, and similar platforms) — to report the gross amount of payment transactions settled on behalf of participating payees. Before the ARPA change, third-party settlement organizations were required to report only if a payee received more than $20,000 in gross payments and more than 200 transactions during the calendar year.[2]
Section 9674 of the American Rescue Plan Act reduced the reporting threshold for third-party settlement organizations to $600 in aggregate gross payments, with no transaction count requirement. The change was originally effective for calendar year 2022. Payment card networks were not affected — their reporting remains triggered at $1 (effectively all transactions).
The reduced threshold was projected to generate approximately 44 million additional Forms 1099-K annually, up from approximately 14 million under the old rules. Many of these new forms would go to casual sellers — individuals selling used personal items through online marketplaces, receiving reimbursements through Venmo, or collecting small amounts through various payment apps.
The First Delay (2022)
In December 2022, the IRS issued Notice 2023-10, delaying the $600 threshold for calendar year 2022 and designating 2022 as a "transition year" during which the prior $20,000/200-transaction threshold would continue to apply. The IRS cited the need for additional taxpayer education, concerns about the volume of potentially confusing information returns, and the risk of matching notices being sent to taxpayers who owed no additional tax because the reported gross proceeds were offset by basis or represented nontaxable transactions (such as the sale of personal items at a loss).
The Second Delay (2023) and the $5,000 Transitional Threshold
The November 2023 announcement goes a step further. Rather than simply delaying the $600 threshold again, the IRS has adopted a phased approach. For calendar year 2023, the pre-ARPA $20,000/200-transaction threshold remains in effect. For calendar year 2024, a new $5,000 transitional threshold will apply — meaning third-party settlement organizations must file Form 1099-K for any payee who receives more than $5,000 in gross payments during the year. The IRS has indicated that further guidance will address the path from $5,000 to the statutory $600 threshold in subsequent years.[3]
The phased approach is a pragmatic response to the operational and educational challenges that prompted the first delay. By stepping down the threshold gradually, the IRS aims to increase the number of 1099-K recipients incrementally rather than flooding the system with tens of millions of new forms at once.
What This Means for Taxpayers
The delays do not change the underlying tax law. Income is income regardless of whether the IRS receives an information return. Taxpayers who sell goods or services through online platforms are required to report the income on their tax returns whether or not they receive a Form 1099-K. The 1099-K is a tool for IRS enforcement — it helps match reported income to third-party data — but the obligation to report exists independently.[4]
That said, the practical reality is that many casual sellers do not report small amounts of income from online sales, particularly when the sales are of used personal items at a loss (which produce no taxable income). The sudden arrival of a Form 1099-K reporting $3,000 in gross proceeds from eBay sales of used clothing could create confusion and unnecessary correspondence with the IRS for taxpayers who owe nothing but must explain the discrepancy.
For businesses and self-employed individuals who receive payments through third-party platforms, the threshold changes have less practical impact — this income should already be reported on Schedule C, Schedule E, or within the entity's return. The 1099-K is a cross-check, not a trigger for reporting.
Planning Considerations
Business owners who rely on third-party payment platforms should ensure their records can reconcile gross proceeds reported on Form 1099-K with the net taxable income reported on their returns. The gross proceeds figure on a 1099-K includes refunds, returns, fees, and nontaxable components of transactions. A taxpayer who receives a 1099-K showing $50,000 in gross proceeds but actually netted $35,000 after fees and returns needs documentation to support the difference.
The IRS has indicated it is developing guidance to help taxpayers understand what to do when they receive a Form 1099-K that includes nontaxable amounts. In the meantime, maintaining contemporaneous records of transaction details — particularly for returns, refunds, and personal-item sales — is the best protection against matching-notice headaches.[5]
The ultimate trajectory is clear: the $600 threshold will eventually take effect, and the volume of 1099-K reporting will increase substantially. Taxpayers and advisors should use this additional transition time to prepare — reviewing recordkeeping practices, educating clients about the reporting obligations, and ensuring that tax return preparation processes can handle the increased flow of information returns.