1099-K Changes in 2025: What Gig Workers and Side Hustlers Need to Know

Introduction

In 2025, the IRS is cracking down on income reporting from platforms like Venmo, PayPal, Etsy, and eBay — and that means more gig workers will receive a 1099-K form. If you’ve got a side hustle or freelance income, here’s what you need to know to stay compliant and avoid surprises.

What Is a 1099-K and Who Gets One?

Form 1099-K reports payments you received through third-party networks — like credit card processors or digital platforms (Stripe, PayPal, Square). It was originally designed for larger merchants, but that’s changing.

What's Changing in 2025?

As of 2025, the threshold for receiving a 1099-K is dropping significantly:

• Old rule: $20,000 and 200 transactions
• New rule: Over $600 — regardless of number of transactions

This means even casual sellers and small side hustlers will likely receive one if they use payment apps.

Threshold Amounts and Platforms Affected

Any platform that facilitates payments may issue a 1099-K if you exceed $600 in gross payments, including:

• PayPal
• Venmo (for business transactions)
• Cash App for Business
• Shopify, eBay, Etsy
• Airbnb, Uber, Lyft

These platforms are required to report your income to the IRS — and send you a copy too.

How to Know If You're Impacted

If you use any of these platforms to accept payments for goods, services, or freelance work — you’re likely impacted. Even casual side income (like reselling or tutoring) could generate a 1099-K.

What to Report (and What Not To)

Not all 1099-K income is taxable — but the IRS assumes it is unless you prove otherwise. You must report any business or self-employment income.

But:

• Personal reimbursements (splitting rent, birthday gifts) are not taxable
• Sales of personal items at a loss may not be taxable, but still may trigger reporting

Keep detailed records to separate business and personal transactions.

Common Mistakes with 1099-K Reporting

• Reporting 1099-K income and the same income again manually (double reporting)
• Ignoring the form entirely — this will trigger a mismatch with the IRS
• Forgetting to deduct expenses tied to that income

How This Affects Tax Liability and Deductions

The income reported on your 1099-K should be offset by eligible business expenses. Track and deduct items like:

• Supplies or cost of goods sold
• Transaction and platform fees
• Shipping costs
• Marketing and software

Otherwise, you'll be taxed on gross income — which can overstate your profits.

Recordkeeping Tips for Gig Workers

• Separate business and personal accounts
• Use a spreadsheet or bookkeeping app to track income & expenses
• Save all receipts and platform reports
• Keep a summary of each month’s transactions

The more organized you are, the easier it will be to defend your numbers if the IRS comes calling.

How Wood Tax Advisory Helps You Stay Compliant

We help gig workers and side hustlers:

• Review and reconcile 1099-K income
• Deduct legitimate business expenses
• File accurately and avoid IRS red flags

Whether it’s a hobby that took off or a full-fledged hustle, we’ve got you covered.

Conclusion & Call to Action

The 1099-K threshold change will affect millions of people in 2025 — don’t be caught off guard. Schedule a free tax consult with Wood Tax Advisory and learn how to protect your income, deductions, and peace of mind.