The $600 Rule Is Dead. The Threshold Is Back To $20,000.

What actually changed with 1099-K reporting, and where state rules still differ

For two years, merchants were bracing for a $600 tax reporting threshold. That rule is dead. Here's what's actually in effect.

The Federal Threshold Is Back To $20,000

After years of planned drops toward $600, new legislation reinstated the original $20,000-and-200-transaction threshold for 1099-K reporting, retroactive to 2022. Merchants who had been budgeting around the lower number can plan around the restored threshold instead.

But State Thresholds Can Still Be Much Lower

Several states set their own 1099-K threshold at just $600, with no transaction minimum, regardless of the federal number. Sell into one of those states, and a merchant can receive a form well before the federal threshold ever applies, so it's worth checking state-specific rules rather than assuming the federal number is the only one that matters.

No Form Doesn't Mean No Obligation

Every dollar of business income is taxable whether or not a 1099-K is ever issued. Merchants who assume "no form, no reporting" are setting themselves up for a mismatch down the line when the IRS cross-references other data sources.

TIN Mismatches Trigger Backup Withholding

If a Taxpayer Identification Number doesn't match IRS records, a common snag for foreign-owned entities, the platform is required to withhold twenty-four percent of gross proceeds, regardless of whether any reporting threshold was ever crossed at all.

The Takeaway

The reversal to $20,000 is genuinely good news for most merchants, but it doesn't eliminate the need to understand state-specific rules or make sure your TIN information is accurate and matched. Staying ahead of both prevents surprises at tax time.