New IRS Update Requires Form 1099-K For Payments Of $5K+ Received Through Cash App Or PayPal

Freelancers making $5,000 from third-party payment apps will be required to report it on their taxes.

The Internal Revenue Service (IRS) now requires freelancers to report payments of $5,000 and up received via third-party apps like CashApp, PayPal, or Venmo.

The new tax reporting rule requires platforms like PayPal, Venmo, and CashApp to issue tax form 1099-K for earnings exceeding $5,000, CNET reports. While it’s not a new rule for freelancers, it’s a new requirement for third-party payment apps so that the IRS can keep track of transactions that might otherwise go unreported.

A 1099-K is a tax form that reports income received through a third-party payment platform for temporary work, such as side hustles, freelance agreements, or contractor positions where taxes are not withheld. The tax agency is solely concerned with the income you earned as a freelancer, not the money you may have sent to family or friends for rent or to share a dinner bill.

“The taxation and tax treatment requirements for taxpayers has not changed,” said Mark Steber, chief tax information officer for Jackson Hewitt. “The IRS has always considered this taxable income to be taxable and should be reported on a tax return.”

Those who made $5,000 or more through a third-party payment app will be sent a 1099-K form to report their income when they file their tax return in 2025. This is nothing new to freelancers earning over $20,000 in commercial payments across more than 200 transactions from third-party payment apps.

If you consistently earn over $20,000 in freelance income, are paid via Venmo, and have received more than 200 transactions, you may have previously received a 1099-K tax form. Now, those who make at least $5,000 can join the club.

This comes ahead of new reporting requirements, first announced in the American Rescue Plan. The plan will eventually require third-party payment apps to report earnings over $600 to the IRS.

“Prior to 2024, the earnings threshold was $20,000 and 200 transactions to receive a 1099-K tax document,” Steber said.

For freelancers’ 2024 taxes (to be filed in 2025), the IRS plans a phased rollout requiring payment apps to report earnings of freelancers and business owners over $5,000 rather than the previous $600 threshold. This increase minimizes inaccuracies and allows the agency and payment apps more time to prepare for the $600 minimum.