If your business gets paid through credit cards, payment apps, or online marketplaces, Form 1099-K remains an important tax document in 2025. But the reporting rules depend on how you were paid. For small business owners, the biggest point of confusion is that payment card transactions and third-party network transactions do not follow the same threshold rules.
Here is what matters for 2025.
What Form 1099-K reports
Requires a payment settlement entity to file an annual information return showing the participating payee’s name, address, and TIN, along with the gross amount of reportable payment transactions for the year.
Under, reportable payment transactions include:
- payment card transactions, and
- third party network transactions.
The IRS explains that Form 1099-K reports gross payments, not net income. Gross amount means the total dollar amount of reportable transactions without reducing for credits, cash equivalents, discounts, fees, refunds, or similar adjustments.
That means the amount on Form 1099-K is often higher than the income you ultimately report as taxable profit.
The key 2025 rule: different thresholds depending on payment type
1. Payment card transactions: no minimum threshold
Does not provide a de minimis exception for payment card transactions. If you accept a credit card, debit card, or qualifying stored-value card as payment, those transactions are reportable regardless of amount.
So if your business accepted even a very small amount through payment cards, a Form 1099-K may still be required for those payments.
2. Third-party settlement organizations: 2025 transition threshold
As codified in the Code source provided, states that a third party settlement organization reports third party network transactions only if:
- the amount exceeds $20,000, and
- the aggregate number of transactions exceeds 200.
But for 2025, IRS administrative guidance modifies enforcement and administration. Notice 2024-85 provides that calendar year 2025 is the final transition period, and for 2025 a TPSO is not required to report payments in settlement of third party network transactions unless aggregate payments to the payee exceed $2,500, regardless of the number of transactions. The IRS also states it will not assert or penalties for failure to file or furnish Forms 1099-K for 2025 unless aggregate payments exceed $2,500.
So for 2025, the practical federal TPSO threshold in the sources is:
- more than $2,500 total payments, and
- no transaction-count requirement.
Examples of TPSOs include payment apps and online marketplaces that act as the central organization obligated to pay participating payees.
Who must file the form
Defines the payment settlement entity. It is:
- the merchant acquiring entity for payment card transactions, and
- the third party settlement organization for third party network transactions.
For payment card transactions, the merchant acquiring entity is generally the bank or organization contractually obligated to pay the merchant.
For third party network transactions, the TPSO is the central organization contractually obligated to pay participating payees.
There are also intermediary rules. If transactions of multiple participating payees are settled through an intermediary, the intermediary may be treated as the participating payee for the upstream reporting obligation and as the payment settlement entity for downstream reporting to the actual payees.The IRS FAQs describe this as the “aggregated payee” rule.
Also provides that if an electronic payment facilitator or other third party makes settlement payments on behalf of the payment settlement entity, that facilitator or third party makes the return instead of the payment settlement entity.
What counts as a payment card or third-party network
Defines a payment card broadly. It includes a card issued under an arrangement involving one or more issuers, a network of unrelated persons who accept the card, and settlement mechanisms between acquirers and merchants. Accepting an account number or similar indicia associated with a payment card is treated the same as accepting the card itself.
Defines a third party payment network as an arrangement involving:
- accounts with a central organization,
- a substantial number of unrelated providers of goods or services,
- standards and mechanisms for settling transactions, and
- a guarantee that providers will be paid.se generally is not a TPSO because it processes payments but does not have the required contractual relationship with payees.
Filing deadlines for 2025 Forms 1099-K
The IRS states that Forms 1099-K must be:
- furnished to payees by January 31 following the calendar year,
- filed with the IRS by February 28 if paper-filed, or
- filed by March 31 if electronically filed.
Publication 1220 for tax year 2025 confirms the general due dates for Forms 1099 and recipient copies:
- IRS electronic filing due date: March 31
- recipient copy due date: January 31.
Electronic filing rules matter more now
Publication 1220 states that under TD 9972, businesses generally must file information returns electronically if they are required to file 10 or more information returns in total across form types.
That means a small business may be required to e-file Forms 1099-K if, when combined with other information returns, it reaches the 10-return threshold.
Forms 1099-K may be filed electronically through FIRE or IRIS, although Publication 1220 indicates the IRS is transitioning away from FIRE and toward IRIS for future filing seasons.
Backup withholding remains important
Notice 2024-85 emphasizes that backup withholding under is a separate issue from the reporting threshold. requires backup withholding in certain cases, including when the payee fails to furnish a TIN or furnishes an incorrect TIN.
The notice explains that under section 31.3406(b)(3)-5, whether TPSO payments are subject to backup withholding is determined without regard to the statutory monetary or transaction thresholds in. Those thresholds are only for information reporting.
For 2024, the IRS provided transitional penalty relief for TPSOs that failed to withhold and pay backup withholding tax. But for 2025 and after, the IRS will assert penalties under and for failure to withhold and pay backup withholding tax when required.
So even if a TPSO is not required to issue a Form 1099-K because the payee is below the 2025 transition threshold, TIN collection and backup withholding obligations may still matter.
What small business owners should expect if they receive a Form 1099-K
The IRS FAQs stress several practical points:
- receiving a Form 1099-K does not itself determine taxability,
- all taxable income must be reported whether or not a Form 1099-K is received,
- the form reports gross payments, not profit.
If you sold goods or provided services, you generally use the form together with your books and records to determine the correct amount of taxable income.
If the form is incorrect, the IRS says the taxpayer should contact the filer or the payment settlement entity shown on the form and request a corrected form. The IRS cannot correct the issuer’s Form 1099-K.
Important caveat for 2026 and beyond
Notice 2024-85 states that for Forms 1099-K for calendar years beginning after December 31, 2025, the TPSO reporting threshold becomes more than $600 in aggregate payments, regardless of the number of transactions.
So the 2025 rule is transitional. Small business owners using payment apps or online marketplaces should understand that the federal TPSO threshold in the sources drops again after 2025 unless further guidance or legislation changes it.
Bottom line for 2025
For 2025, small business owners should keep these rules straight:
- Payment cards: Form 1099-K reporting applies with no minimum threshold.
- TPSO payments: Under the 2025 transition relief, reporting generally applies only if aggregate payments exceed $2,500, with no transaction-count requirement.
- Gross reporting: Form 1099-K reports gross payments, not net taxable income.
- Recipient deadline: January 31, 2026.
- IRS filing deadline: February 28, 2026 on paper or March 31, 2026 electronically.
- Backup withholding: Threshold relief does not eliminate TIN collection or backup withholding concerns.
