1099-K Threshold Tracker

A Form 1099-K is an information return filed by a payment settlement entity (a marketplace like Etsy, a payment processor like Stripe, or a peer-to-peer service like PayPal/Venmo/Cash App) reporting the gross amount paid to you during the calendar year. It's a copy: one goes to you, one goes to the IRS, and one goes to your state if your state requires it. The form itself does not change what you owe — every dollar of business income has always been taxable — but it's the IRS's signal that the income exists and they'll be looking for it on your return.

The federal threshold for tax year 2025 (forms issued January 2026) and beyond is $20,000 in gross payments AND more than 200 transactions, per platform, per year. This is the original pre-2022 threshold, which Congress permanently reinstated by passing the One Big Beautiful Bill Act in July 2025. The earlier $600/no-transaction-floor threshold (planned for tax year 2024, then phased to $5,000 and $2,500) is no longer in effect.

Each platform tracks its own. If you took $15,000 on Etsy Payments, $12,000 on PayPal goods-and-services, $8,000 on Venmo business, and $7,000 on Stripe, none of those individually crosses the federal $20K threshold — none of them will issue a 1099-K under federal rules. (You still owe tax on the full $42,000 of business income — the 1099-K just doesn't get filed.) The tracker above sums everything for you so you can see both the per-platform and the all-up picture.

Ten states (plus DC) require 1099-K reporting at lower thresholds than the federal $20K/200. The five states at $600 with no transaction minimum (DC, Maryland, Massachusetts, Vermont, Virginia) and the two states at higher dollar amounts but still well below federal (Illinois at $1,000 + 4 transactions, New Jersey at $1,000) catch the most sellers. Arkansas ($2,500), Montana ($600), and Rhode Island ($100) round out the list.

State thresholds operate independently of federal: a Massachusetts seller who took $700 on PayPal in 2025 will receive a 1099-K for Massachusetts state reporting purposes even though they are nowhere near the federal $20K. The form copy still arrives in the mail and the income still needs to be on the federal return; only the state-filing trigger changes. Select your state above and the tracker recomputes the threshold for each platform.

Counts: goods-and-services payments through a payment app, marketplace order payouts (Etsy Payments, eBay Managed Payments), credit-card sales processed through Square or Stripe, Venmo business profile payments, Cash App for Business payments, Shopify Payments, and Faire payouts.

Does not count: friends-and-family PayPal/Venmo transfers (assuming they aren't actually disguised business payments), personal Cash App transfers, gifts, refunds (sort of — the 1099-K reports gross, so a $100 sale and a $100 refund still shows as $100 on the form even though net is zero), and direct bank-to-bank transfers (ACH/Zelle — those typically don't generate 1099-Ks unless processed by a designated payment settlement entity).

The "gross" reporting is one of the most confusing parts of the form. The 1099-K reports the full amount of every transaction the processor handled, including any portion that was refunded, the platform fee, the payment-processing fee, sales tax collected on your behalf, and shipping charged to the customer. Your taxable income is much lower than the 1099-K gross number — you back out fees, refunds, and COGS on your Schedule C. A common shock for first-year cottage bakers and Etsy sellers is realizing the $25,000 number on the 1099-K is what the IRS sees, not what hit their bank account.

On a typical Etsy Schedule C, the math looks like this. The 1099-K says $25,000 gross. From that you subtract the Etsy transaction fees (~6.5%), payment processing fees (~3% + $0.25), listing fees ($0.20 per listing renewed or sold), Offsite Ads fees (~15% on attributed orders), shipping you charged the customer (which appears in the gross but offsets your shipping-label expense), sales tax that Etsy collected on your behalf and remitted directly (which appears in the gross even though you never touched it), and any refunds. That gets you to net revenue — typically $19,000–21,000 of the $25K gross — and from that you subtract COGS, materials, supplies, and home-office to land on taxable profit.

Keep documentation for every adjustment. The IRS allows all of these subtractions, but if they audit, the burden is on you to show the math. A bookkeeping tool (or this site!) that ties each Etsy/PayPal/Stripe payout back to fees, refunds, and the specific orders it covered makes reconciliation a question of running a report, not reconstructing twelve months of payouts in April.