Disclaimer: This article is educational and does not constitute tax advice. Tax outcomes depend on your specific facts and circumstances. Consult a licensed CPA before filing. Circular 230 applies.
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 | more than $20,000 AND more than 200 transactions | IRC Section 6050W(e) (original, enacted 2008) |
| 2022 | more than $20,000 and more than 200 transactions maintained (delay #1) | IRS Notice 2023-10 |
| 2023 | more than $20,000 and more than 200 transactions maintained (delay #2) | IRS Notice 2023-74 |
| 2024 | $5,000 transitional threshold announced | IRS Notice 2024-85 |
| 2025+ | more than $20,000 AND more than 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 OBBBA Section 70432, signed July 4, 2025, repealed the ARPA change retroactively and permanently restored the original threshold of more than $20,000 and more than 200 transactions. This is settled law - no further changes are pending.
What this means: For a third-party-network (TPSO) payment flow, a Depop seller with $15,000 and 180 transactions would be below the federal mandatory threshold. Do not generalize that result to every payment processor: a payment-card merchant acquirer has no federal de-minimis threshold, and an issuer may furnish a form below a mandatory threshold. The payment flow and actual issuer control.
State rules are separate. NJ-WT includes a $1,000-or-withholding payer state-copy filing duty for covered Forms 1099. That duty does not replace the federal Form 1099-K issuer and transaction rules or guarantee a separate state recipient form. State rules and platform policies can differ, so confirm the issuer, tax year, and form actually furnished.
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 (payment apps like PayPal, Venmo, and Cash App) and to payment card networks (including card processing by Stripe or Square). 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 the schedule its character dictates - Schedule C for self-employment income, Schedule E for rents/royalties, Schedule D/Form 8949 for property sales, wages if it is really payroll, or Schedule 1 other income for the residual cases.
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 (a couple paying personally for their own wedding is not acting in the course of a trade or business, and 1099-NEC reporting only applies to business payers). 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 |
This illustration produces $7,000 of Schedule C profit rather than treating the $25,000 gross payment amount as profit. It does not compute a return-level tax difference: self-employment tax generally begins with the Schedule SE 92.35% adjustment, the deductible portion of that tax can affect AGI, and income tax depends on the taxpayer's brackets, deductions, credits, other income, and complete return. The example demonstrates gross-to-net reconciliation, not an overpayment amount.
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 records-first overview of marketplace statements, gross-to-net reconciliation, and inventory support, see the E-Commerce Tax Hub.
No 1099-K? You Still Report Income
The threshold of more than $20,000 and more than 200 transactions 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 is below the mandatory TPSO threshold and therefore may receive no federal 1099-K (a platform can still furnish one voluntarily or under a different payment-flow rule), but must still report the net profit; the resulting income tax depends on the complete return, and SE tax generally applies once net self-employment earnings reach $400 (computed on 92.35% of 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 Automated Underreporter (AUR) process compares federal information returns with the filed return. Bank deposits and platform records may be relevant in a separate inquiry or examination, but they are not AUR matching inputs. NJ-WT's $1,000-or-withholding rule is a payer state-copy filing duty for a covered form; it does not create a separate recipient Form 1099-K or change the federal issuer and payment-flow rules.
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: Do not put personal-item proceeds on Schedule C. Per current IRS guidance, report the 1099-K amount on Schedule 1 (Form 1040), line 8z, and enter an offsetting adjustment on line 24z (or exclude the amount as described in the Form 1040 instructions' 1099-K guidance). Losses on personal-use property are not deductible, so the offset cannot exceed the proceeds; if all items were personal and sold at a loss, the net result is zero taxable income from those sales. Personal items sold at a gain go on Form 8949 and Schedule D instead. Document the original purchase prices - receipts, credit card statements, or screenshots of original listings - in case the IRS questions the offset.
Personal sales, profit motive, and trade-or-business status are separate: Selling personal-use property remains a property-transaction question. For a recurring resale activity, IRC Section 183 applies nine non-exclusive factors to whether the activity is engaged in for profit; no factor or numerical majority controls. Section 183(d) creates a rebuttable presumption only of profit motive when gross income exceeds attributable deductions in 3 of 5 consecutive years. It is not a safe harbor: failure creates no contrary hobby presumption, and meeting it does not by itself establish a Section 162 trade or business or Schedule C treatment. Continuity, regularity, inventory acquisition, records, and the complete facts must be evaluated separately.
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 information-return filing is separate. NJ-WT's $1,000-or-withholding rule is a payer state-copy filing duty for covered Forms 1099; it does not establish a universal recipient Form 1099-K threshold. Reconcile any federal or state form actually furnished to the underlying records and report income under the applicable return rules.
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 has no small-income exclusion for business profit. NJ Gross Income Tax reaches its sixteen enumerated statutory categories (N.J.S.A. 54A:5-1) subject to their exclusions - it is not literally "all income" - but there is no de minimis exclusion merely because taxable business receipts are small, and 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, subject to the NJ filing threshold.
Related reading: E-Commerce Tax Hub | Tax Preparation Services
Frequently Asked Questions
Does Venmo report my transactions to the IRS?
Form 1099-K treatment depends on the legal issuer and payment flow. The more-than-$20,000 and more-than-200-transaction federal mandatory threshold applies to qualifying TPSO transactions; payment-card merchant acquirers have no federal de-minimis threshold, and an issuer may furnish below an ordinary threshold. NJ-WT's $1,000-or-withholding rule concerns the payer's state-copy filing duty and does not promise a recipient form.
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. Regular purchases for resale, profit intent, frequency, records, and operational conduct are relevant facts, but no single fact automatically establishes a trade or business or Schedule C treatment.
What is the 1099-K threshold for 2026?
Under OBBBA Section 70432, the federal mandatory threshold for third-party-network Form 1099-K reporting is more than $20,000 in gross payments AND more than 200 transactions per platform per year. Payment-card reporting follows a separate no-de-minimis rule. NJ-WT's $1,000-or-withholding state-copy rule is a payer filing duty, not a universal recipient-form threshold.
How do I report a 1099-K on my tax return?
First classify the transactions. A qualifying resale trade or business generally reports gross receipts on Schedule C, accounts for COGS in Part III, and deducts supported business expenses in Part II. Personal-item sales and activities not engaged in for profit use different reporting rules. A 1099-K does not itself establish Schedule C treatment.
What if I got a 1099-K but didn't make a profit?
Reconcile the 1099-K to the underlying transactions before selecting a form. A supported Schedule C trade or business reports its gross receipts, COGS, and allowable expenses, but a net loss does not prove business status or guarantee an offset against other income. Section 183, basis, at-risk, passive-activity, excess-business-loss, and other limitations may apply.
Can the IRS find income I received through Cash App?
The IRS can receive a federal Form 1099-K when the actual issuer and payment flow require or voluntarily produce one. AUR compares federal information returns with the filed return; bank deposits and platform records may be relevant in a separate inquiry or examination, but they are not AUR matching inputs. NJ-WT's $1,000-or-withholding state-copy duty does not guarantee a recipient form or alter the federal Form 1099-K rules.
