In This Article
- The 1099-K Threshold: The Full History
- Personal Payments Are NOT Taxable
- Zelle Is Different: No 1099-K, Still Taxable
- The Gross Reporting Trap: 1099-K Shows Revenue, Not Profit
- No 1099-K? You Still Report Income
- Selling Personal Items at a Loss
- NJ-Specific Rules for Payment App Income
- Frequently Asked Questions
The 1099-K Threshold: The Full History
The Form 1099-K reporting threshold has been one of the most confusing topics in tax law since 2021. Here is the complete chronology:
| Tax Year | Threshold | Authority |
|---|---|---|
| Pre-2022 | $20,000 AND 200+ transactions | IRC Section 6050W(e) (original, enacted 2008) |
| 2022 | $20,000/200 maintained (delay #1) | IRS Notice 2023-10 |
| 2023 | $20,000/200 maintained (delay #2) | IRS Notice 2023-74 |
| 2024 | $5,000 transitional threshold announced | IRS Notice 2024-85 |
| 2025+ | $20,000 AND 200+ transactions — permanent | OBBBA Section 70432 (P.L. 119-21) |
The American Rescue Plan Act (ARPA) of 2021 dropped the threshold to $600 with no transaction minimum, effective for 2022. The IRS delayed implementation three times. OBBBA Section 70432, signed July 4, 2025, repealed the ARPA change retroactively and permanently restored the original $20,000/200 threshold. This is settled law — no further changes are pending.
What this means: A Depop seller who processes $15,000 and 180 transactions through a payment processor will NOT receive a federal 1099-K. Both conditions must be met: $20,000 in gross payments AND more than 200 transactions with the same payment processor in the same calendar year.
State thresholds are lower. New Jersey requires 1099-K issuance at $1,000 with no transaction minimum. Other states with sub-federal thresholds include Vermont, Massachusetts, Maryland, and Virginia at $600, and Illinois at $1,000 with 4+ transactions. A NJ seller earning $5,000 through Venmo goods-and-services payments will receive a state-triggered 1099-K even though the federal threshold was not met.
Personal Payments Are NOT Taxable
Splitting a dinner bill on Venmo is not income. Paying a friend back for concert tickets on Cash App is not income. Sending birthday money through Zelle is not income. These are personal transfers — they are not payments for goods or services, and they are not taxable under any provision of the Internal Revenue Code.
The confusion stems from the 2021-2024 period when the announced $600 threshold scared millions of casual payment app users into thinking every Venmo transaction would be reported to the IRS. That threshold was never enforced and is now permanently repealed.
How platforms distinguish personal from business: Venmo and Cash App have separate payment categories — "friends and family" (personal) and "goods and services" (business). Only goods-and-services transactions count toward the 1099-K threshold. PayPal works the same way. If a payment is incorrectly categorized as goods and services, it may be included in 1099-K gross calculations. The fix is to contact the platform for reclassification before the form is issued, or to document the personal nature of the payment in case of an IRS inquiry.
Gifts are not income to the recipient. Under IRC Section 102(a), gross income does not include the value of property acquired by gift. A parent sending $500 to a college student via Venmo is a gift — not taxable to the student, not reportable, and not included in any 1099-K calculation (assuming the payment was sent as friends and family).
Zelle Is Different: No 1099-K, Still Taxable
Zelle does not issue Form 1099-K. This is not a loophole — it is an architectural distinction. Zelle operates as a bank-to-bank transfer network, not a third-party settlement organization (TPSO) under IRC Section 6050W. The 1099-K reporting requirement applies to TPSOs (PayPal, Venmo, Cash App, Stripe) and payment card networks. Zelle is neither.
However, income received through Zelle is fully taxable if it represents payment for goods or services. The absence of a 1099-K does not eliminate the tax obligation — it simply means there is no third-party information return. The earner is still required to report the income on Schedule C (for self-employment income) or as other income on Schedule 1.
A common scenario: a freelance photographer receives $3,000 via Zelle for a wedding shoot. No 1099-K is issued (Zelle does not issue them). No 1099-NEC is issued (the client paid less than $2,000 under the new OBBBA threshold). The photographer still owes income tax and self-employment tax on the $3,000. The reporting obligation exists independent of any information return.
The Gross Reporting Trap: 1099-K Shows Revenue, Not Profit
The most expensive mistake for resellers and small sellers is treating the 1099-K number as taxable income. Form 1099-K reports gross payments — the total amount processed through the platform before any deductions for fees, shipping, refunds, returns, or cost of goods sold.
Consider a hypothetical Depop seller:
| Item | Amount |
|---|---|
| 1099-K gross payments (Box 1a) | $25,000 |
| Cost of goods sold (inventory purchased) | -$15,000 |
| Shipping costs | -$2,000 |
| Platform fees (Depop commission + processing) | -$1,000 |
| Net profit (Schedule C, Line 31) | $7,000 |
Tax is owed on $7,000 — not $25,000. The difference in tax at a 22% bracket plus 15.3% SE tax is approximately $4,698 in overpayment if the full 1099-K is reported as profit without deducting COGS and expenses.
The Schedule C reconciliation: Report the 1099-K gross amount on Schedule C, Line 1 (Gross Receipts). Report returns and allowances on Line 2. Calculate Cost of Goods Sold in Part III (Lines 35-42), flowing to Line 4. Deduct platform fees, shipping, and other business expenses in Part II. The result on Line 31 is net profit — the actual taxable amount.
For a complete platform-by-platform walkthrough of fee structures and COGS tracking for Poshmark, eBay, Depop, and StockX, see Reseller Taxes: Poshmark, eBay, Depop Guide. For live auction and collectible sellers, see Whatnot Seller Taxes.
No 1099-K? You Still Report Income
The $20,000/200 threshold determines whether the platform sends a form. It does not determine whether the income is taxable. A seller earning $18,000 on eBay with 150 transactions receives no federal 1099-K but owes tax on every dollar of net profit.
Under IRC Section 61(a), gross income includes all income from whatever source derived. The IRS FAQ on digital payments states explicitly: "Regardless of whether you receive a Form 1099-K, the income you receive from the sale of goods and performance of services is generally taxable."
The IRS cross-references payment data from multiple sources. Even without a 1099-K, bank deposits, state information returns (NJ's $1,000 threshold means a state 1099-K may exist even when the federal one does not), and platform data can all generate inquiries. The Automated Underreporter (AUR) system matches reported income against these data points.
Selling Personal Items at a Loss
Selling a jacket purchased for $200 at $50 on Depop is not taxable income. This is a personal loss — the item was not held for investment or business, and it was sold below the original purchase price.
Under IRC Section 165(c), losses on personal-use property are not deductible. But the sale also does not generate taxable income because there is no gain. The amount realized ($50) is less than the adjusted basis ($200). No gain, no tax.
If a 1099-K was received that includes personal-item sales at a loss: Report the 1099-K amount on Schedule C or Schedule 1 and offset it with the cost basis of items sold. If all items were personal and sold at a loss, the net result is zero taxable income from those sales. Document the original purchase prices — receipts, credit card statements, or screenshots of original listings — in case the IRS questions the offset.
The hobby vs. business distinction: Occasional personal-item sales (cleaning out a closet) are not a business. Regular buying-and-selling activity conducted with the intent to profit (buying inventory at thrift stores to resell) is a business, even if it produces a loss in some years. Business losses are deductible on Schedule C. Hobby losses under IRC Section 183 cannot offset other income — this rule was reinforced (not changed) by the OBBBA.
NJ-Specific Rules for Payment App Income
New Jersey has several rules that diverge from federal treatment and create unexpected liability for payment app sellers:
NJ 1099-K threshold is $1,000 with no transaction minimum. A college student in NJ earning $1,200 from Depop sales receives a state-triggered 1099-K even if no federal form is issued. The NJ Division of Taxation uses these forms to verify state return reporting.
NJ filing threshold is $10,000 (single). NJ does not have a standard deduction equivalent that shields low-income filers the way the federal $16,100 standard deduction does. A student earning $12,000 from reselling may owe NJ tax even if federal liability is near zero after the standard deduction and QBI.
NJ does not conform to the QBI deduction. The 20% Section 199A deduction that reduces federal taxable income has no NJ equivalent. Under N.J.S.A. 54A:5-1(b), the full net business income is taxable for NJ GIT purposes. For a complete analysis, see How NJ Treats OBBBA Deductions.
NJ taxes all income. NJ does not exclude small amounts of self-employment income from taxation. There is no NJ equivalent of the federal standard deduction shielding low-income filers. A NJ resident earning $10,500 in total income may owe NJ tax even if their federal taxable income is zero.
Related reading: Reseller Taxes: Poshmark, eBay, Depop Guide | Whatnot Seller Taxes | Etsy Seller Tax Guide | Tax Preparation Services
## Frequently Asked Questions
Does Venmo report my transactions to the IRS?
Venmo reports transactions to the IRS via Form 1099-K only if you meet the federal threshold ($20,000 and 200+ transactions in goods-and-services payments) or your state's lower threshold. Personal (friends and family) payments are not reported. NJ's threshold is $1,000 with no transaction minimum.
Is money I receive on Zelle taxable?
Zelle does not issue 1099-Ks because it is a bank-to-bank transfer network, not a TPSO under IRC Section 6050W. However, income received via Zelle for goods or services is still taxable. The absence of a form does not eliminate the tax obligation.
What if my 1099-K includes personal payments?
If a personal payment was incorrectly classified as goods and services, contact the platform to reclassify it before the 1099-K is issued. If the form has already been issued, report the gross amount and offset it with documentation showing the personal nature of the payment.
Do I owe tax on selling used clothes on Poshmark?
If you sell personal items for less than you paid, there is no taxable gain — no tax is owed. If you regularly buy items with the intent to resell at a profit, that is a business, and net profit is taxable. The distinction depends on the facts: frequency, intent, and whether you are treating it as a business activity.
What is the 1099-K threshold for 2026?
Under OBBBA Section 70432, the federal 1099-K threshold is permanently $20,000 in gross payments AND more than 200 transactions per platform per year. Both conditions must be met. State thresholds are often lower — NJ is $1,000.
How do I report a 1099-K on my tax return?
Report the 1099-K gross amount on Schedule C, Line 1 (Gross Receipts). Deduct cost of goods sold in Part III. Deduct business expenses (platform fees, shipping, supplies) in Part II. Net profit on Line 31 is the taxable amount. Do not report the gross 1099-K as profit — that leads to massive overpayment.
What if I got a 1099-K but didn't make a profit?
Report the 1099-K gross on Schedule C and deduct all legitimate business expenses and COGS. If the result is a net loss, that loss may offset other income on your tax return (subject to hobby loss rules under IRC Section 183 if the activity is not a bona fide business). The key is documenting expenses and COGS with receipts.
Can the IRS find income I received through Cash App?
Yes. The IRS receives 1099-K data from Cash App for accounts meeting the reporting threshold. Additionally, the AUR system cross-references bank deposits, state information returns, and platform data. NJ's $1,000 threshold means state-level reporting may exist even when no federal form is issued.
