The Internal Revenue Service (IRS) recently released an updated fact sheet (FS-2025-08, October 2025) providing revised guidance for Form 1099-K – Payment Card and Third-Party Network Transactions.
While the change primarily affects reporting requirements for third-party settlement organizations (TPSOs), every small-business owner should understand how this update may impact their tax reporting obligations.
What’s Changed?
- TPSO reporting threshold: The threshold remains gross payments exceeding $20,000 and more than 200 transactions in a calendar year.
- Payment-card transactions: There is no minimum threshold — every credit, debit, or gift-card transaction must be reported.
- Income reporting remains required: You must still report all taxable income even if you do not receive a Form 1099-K. Receiving (or not receiving) the form does not change your tax obligation.
Note: Some states have lower 1099-K thresholds and may issue forms even if you do not meet the federal limit.
Why This Matters for Small Businesses
If you operate a small business — such as a nail salon, spa, restaurant, or home-based service — and accept payment cards, you should expect a Form 1099-K for those transactions (since card payments have no minimum threshold).
If you sell goods or services through online platforms or apps that function as TPSOs, the >$20,000 and >200 transactions standard will determine whether you receive a 1099-K at the federal level.
Other key reminders:
- The higher threshold (compared with the previously proposed $600 rule) offers some flexibility, but accurate bookkeeping remains essential.
- A 1099-K reports gross payments, not net income or profit. It does not deduct fees, refunds, discounts, shipping costs, or cost of goods sold — these must be recorded separately in your books.
- Even if your TPSO is not required to issue a form, it may still do so voluntarily or under state rules.
Practical Steps for Your Business
- Maintain clean books – Track all payments, separate business vs. personal transactions, and clearly categorize payment-card vs. third-party-network income.
- Review forms carefully – If you receive a 1099-K, verify that the gross amount matches your records. If incorrect, request a corrected form promptly.
- Don’t rely on the form to report income – No 1099-K doesn’t mean no tax. You must still report all taxable income.
- Understand your platform’s role – Know whether your payment app or marketplace acts as a TPSO and how that affects reporting.
- Educate your team or family – If others handle payments, ensure they understand which transactions may trigger a 1099-K and why proper documentation matters.
Conclusion
The updated 1099-K reporting rules may not bring immediate changes for every small business, but they underscore the importance of accurate record-keeping and clear separation between business and personal transactions.
Being proactive now can prevent stress during tax season.
At The Wisebook, we help small-business owners stay compliant with confidence. Whether you accept card payments, use online platforms, or simply want organized books to make tax filing easier, we’re just one call away.
We provide bookkeeping, payroll, tax preparation, and filing for individuals and businesses — and we help interpret forms like the 1099-K so nothing catches you off guard.
