Why the 2026 1099-K Threshold Is $20,000 and 200 Transactions, Not $600

A payment app or online marketplace that processes a seller’s money may send a Form 1099-K at year end. For 2026, the federal rule generally requires that form only when gross payments to a seller exceed $20,000 and the seller has more than 200 transactions in the calendar year. The IRS says the law reinstated the pre-ARPA threshold, which the American Rescue Plan Act of 2021 had replaced with a $600 level.

The rule has changed several times since 2021, and the sources disagree on some details. The IRS issued frequently asked questions on the threshold in late 2025. This article covers the federal test, what a form reports, how payment cards are treated, the separate question of taxable income, the states that set lower levels, and the points where the available sources conflict.

The federal test for a third-party settlement organization

The threshold applies to third-party settlement organizations, the platforms and payment apps that process payments on a seller’s behalf. The IRS states that these organizations generally need to file only when gross reportable payments to a payee are over $20,000. The transaction test requires more than 200 transactions, not exactly 200.

Credit Karma’s summary says both conditions must be met in the same calendar year. RSM, an accounting and advisory firm, says the reinstated rule applies retroactively to 2022. The IRS summary does not list specific tax years, and the statute itself was not opened for this article, so the exact years covered remain unconfirmed.

Square’s help page adds that accounts sharing a Tax Identification Number have their volume combined when the thresholds are tested. That describes one platform’s practice. The IRS summary read for this article does not address how volume is combined across accounts or platforms.

The 2026 federal test
For 2026, a third-party settlement organization generally files a Form 1099-K only when gross reportable payments to a payee exceed $20,000 and the payee has more than 200 transactions in the calendar year.

What a Form 1099-K reports

Square’s help page says the form reports gross payment amounts in Box 1a and the number of reportable transactions. Included are credit and debit card payments, gift card payments, Cash App Pay where applicable, taxes and tips on card transactions, and card revenue later refunded. Cash sales are excluded.

According to the same page, the reported gross amount is not reduced for processing fees, refunds, chargebacks, discounts, shipping or other adjustments. The form amount can therefore differ from what a seller kept after those items.

Payment cards and the minimum question

Payment card transactions follow a different rule in some sources. RSM states that there is no minimum threshold for payments made by payment card. Credit Karma says card processors report every transaction regardless of amount.

Square’s page gives a different answer. It does not carve out a no-minimum rule for card payments; it applies the $20,000-and-200-transaction standard to accounts in most states and says Square may report below the thresholds at its own discretion. The IRS defines reportable payment transactions to include payment card and third-party network transactions, but the IRS page does not state a minimum for them.

The sources do not agree on the card rule, and this article does not resolve the conflict. A seller who takes both card and marketplace payments should treat each platform’s own statement as the record of what that platform reports.

A 1099-K is not the same as taxable income

Credit Karma states that a seller generally must report taxable income from selling goods or providing services whether or not a Form 1099-K is received, and advises keeping the seller’s own records.

Square’s page says the form amount may be higher than taxable income. It also disclaims tax advice and recommends that sellers consult a tax advisor. The threshold determines when a platform must send a form. A form is not the same as taxable income, and the sources treat them as separate questions.

The IRS page on Form 1099-K does not address whether income must be reported without a form. That point is also made by RSM, in addition to Credit Karma’s summary; Square’s page does not explicitly say so.

A form is not the same as taxable income, and the sources treat them as separate questions.

States that set lower reporting levels

RSM states that several states keep thresholds significantly lower than the federal figure. It names Massachusetts and Maryland at $600 and New Jersey at $1,000. The same summary says Florida and Tennessee are not in the Combined Federal/State Filing Program and require direct reporting of the state-equivalent Form 1099-K.

Square’s page lists a different set of state levels. It gives $600 or more in card payments for the District of Columbia, Maryland, Massachusetts, Vermont and Virginia, $1,200 or more for Missouri, and more than $1,000 in card payments with more than three transactions for Illinois. Square and RSM agree on Massachusetts and Maryland.

Maryland’s rule is described in a 2020 Sovos update on Senate Bill 192. The state removed the transaction count from the federal test and set a $600 level for reportable payments. The change took effect June 1, 2020, and applies to payments made on or after January 1, 2020. Reports go to the Comptroller’s Office and to the payee at least 30 days before the federal filing deadline.

Sovos wrote in 2020 that Maryland was one of nine states with thresholds below the federal level. No current state-by-state list was read for this article, so each state figure here is only as current as the page it comes from.

Where the sources disagree on history and dates

Square’s page says a $600 threshold was announced for 2023 but was never implemented. It lists $5,000 with no minimum transaction count for 2024. Credit Karma’s table differs, listing $20,000 with more than 200 transactions for 2023, $5,000 with no minimum for 2024, and $20,000 with more than 200 transactions for 2025 and 2026.

RSM says the reinstated rule applies retroactively to 2022. The sources do not reconcile the 2023 figure, so readers comparing older articles should expect different numbers for that year.

The dates for the IRS guidance also differ across IRS pages. One summary of the IRS newsroom release gives October 23, 2025, while the IRS form page refers to a November 17, 2025 news item on the same threshold. Until the IRS date is confirmed, this article uses the broader phrase late 2025.

Photo: Syced · CC0 · via Wikimedia Commons