OBBBA Changes Reporting Rules for Freelancers and Gig Workers

If you've ever received a Form 1099 for work you’ve done as a freelancer, sold items online, or used platforms like PayPal or Venmo for business payments, there are two important updates from Congress you should know about.

These changes are designed to reduce paperwork and reporting burdens—especially for those with smaller or occasional transactions.

1. Higher Reporting Threshold for Business Payments

Under current IRS rules, if you’re paid $600 or more by a business during the year, they must send you a Form 1099-NEC or 1099-MISC. But that $600 threshold hasn’t changed in decades—until now.

Starting in 2026, the reporting threshold will be raised from $600 to $2,000. That means if you’re paid less than $2,000 by a business in a year, they won't be required to issue a 1099.

Even better? The new threshold will be adjusted for inflation starting in 2027. So it will increase over time with the cost of living, reducing the need for constant updates by Congress.

2. Rollback of the $600 Rule for Payment Apps

You might remember that the American Rescue Plan Act of 2021 changed the rules for third-party payment networks like PayPal, Venmo, and Cash App. It required them to send you a 1099-K if you received more than $600 in total payments for goods and services—even if it was just one transaction.

This caused confusion and headaches for casual sellers, hobbyists, and people splitting dinner tabs.

Now, Congress is rolling that back. Starting with the 2025 tax year, the old rule returns: payment platforms will only have to send a 1099-K if:

• You receive more than $20,000 in payments, and

• You have more than 200 transactions in a year.

  
  

So, if you’re casually selling items online or using apps for personal transfers, you’re less likely to get hit with surprise tax forms.

3. What About Backup Withholding?

There are also updates to IRS backup withholding rules (where payers withhold a portion of your payments for taxes). Under the new rules, backup withholding won’t apply to third-party payment transactions unless you exceed the same $20,000/200-transaction thresholds. This reduces the chance that you’ll have taxes withheld if you’re under the reporting limit.

What This Means for You

These changes are a win for small sellers, side hustlers, freelancers, and independent workers. You’ll face less paperwork, fewer tax forms, and lower chances of unnecessary IRS confusion.

The higher thresholds make it easier to focus on your work without getting bogged down in reporting rules meant for much larger operations.

Just remember:

• The $2,000 threshold for 1099 reporting by businesses starts in 2026.

• The $20,000/200 transaction rule for payment apps returns in 2025.

  
  

Stay tuned and talk to a tax professional if you’re unsure how these changes affect you.

Disclaimer: This post is for general informational purposes only and does not constitute financial, legal, or tax advice. Always consult with a qualified professional regarding your specific situation before making financial or tax-related decisions. Tax laws and financial markets can change over time; what applies today may not be appropriate tomorrow. Please conduct your own due diligence and make informed choices.