After years of confusion, complaints, and delayed implementation, a major win for taxpayers has made it into law. The One Big Beautiful Bill Act (OBBBA) provides a long-overdue fix: the problematic $600 1099-K reporting threshold enacted in the American Rescue Plan Act (ARPA) has been scrapped and replaced with a more workable standard.
This is a huge victory for the millions of taxpayers caught in the crosshairs of a poorly conceived policy. We flagged the issue here, here, and here, sounding the alarm on how ARPA’s drastic drop in the reporting threshold—from $20,000 and 200 transactions down to just $600—would flood taxpayers with confusing paperwork. Dubbed the “Venmo tax,” the 1099-K often included personal transfers or reimbursements—like splitting dinner or rent—that aren’t actually taxable, leaving many taxpayers confused and at risk of overpaying what they legally owe.
In fact, the IRS delayed implementation multiple times, citing both taxpayer confusion and its own lack of readiness for the deluge of paperwork and questions. Then, in an unprecedented move, the IRS announced it would enforce the law at thresholds of its own choosing—starting at $5,000 in 2024 and $2,500 in 2025—instead of the $600 figure Congress had written into statute.
We warned that there was no clear legal basis for the IRS to rewrite the law on its own. This raised serious concerns about agency overreach, set a troubling precedent, and added even more confusion for taxpayers already struggling with unclear guidance.
Thankfully, Congress listened. OBBBA’s section 70432 restores the previous threshold of 200 transactions and $20,000—reestablishing a safe harbor for people who sell used items online, run virtual garage sales, or use platforms like Venmo to send money to friends or split a dinner tab. These are not transactions that should trigger tax forms in the first place.
The Joint Committee on Taxation estimated that this fix will reduce federal revenues by $8.863 billion over the next decade. However, that estimate assumes the IRS would have fully implemented the $600 threshold starting next year—despite its repeated delays due to ongoing confusion—and that taxpayers wouldn’t simply stop using these platforms to avoid the paperwork hassles and headaches.
This fix was made possible by persistent pressure and evidence-based research to inform lawmakers. Discussions in hearings and legislation from across the aisle to increase the threshold showed that policymakers from both parties recognized ARPA’s threshold was unworkable. Along with many other reforms in OBBBA, including permanence for income tax cuts and full expensing, the 1099-K course correction is a big win for transparency, simplicity, and common sense.