IRS Form 1099-K: The $20,000 Threshold Is Back and What It Means for Crypto
The IRS has confirmed that the Form 1099-K reporting threshold has been reset to $20,000 in gross payments and more than 200 transactions per year. The change, restored by the "One Big Beautiful Bill," rolls back the much lower $600 threshold that the American Rescue Plan Act of 2021 (ARPA) had introduced and directly affects anyone who receives crypto or other payments through third-party settlement networks. If you've been wondering how crypto is taxed in the US and what platforms are now required to report to the IRS on your behalf, this update is the one to read.
What Actually Changed on Form 1099-K
Before ARPA passed in 2021, third-party settlement organizations (TPSOs) only had to file a Form 1099-K when a payee's gross receipts exceeded $20,000 and the number of transactions exceeded 200 in the calendar year. ARPA slashed that to a flat $600 with no transaction-count floor, a shift that triggered years of implementation delays and widespread confusion.
The old threshold is now the current threshold
The One Big Beautiful Bill has retroactively restored the pre-ARPA rules. TPSOs are no longer required to issue a Form 1099-K unless both conditions are met at the same time: gross payments to a single payee top $20,000 and the number of separate transactions exceeds 200. Miss either threshold and no form is required.
Why the IRS updated its FAQs in late 2025
The IRS published updated and new FAQ answers on October 23, 2025, to reflect the legislative shift and give taxpayers and platforms clearer guidance ahead of the next filing season. The FAQ page ties directly into the agency's broader "pay as you go" messaging, reminding filers of their withholding and estimated-tax obligations even when no 1099-K arrives in the mail.
How This Connects to Crypto Tax Reporting
Crypto sits at an interesting intersection here. Some digital asset transactions flow through entities that qualify as TPSOs: think payment processors, certain crypto payment rails, and platforms that settle transactions on behalf of buyers and sellers. Whether a specific exchange or wallet provider meets the legal definition of a TPSO is a fact-specific question, but the 1099-K threshold change matters for any platform that does.
The 1099-K is not the same as the 1099-DA
It's worth keeping these two forms separate in your head. Form 1099-DA, which covers digital asset disposals and is being phased in for brokers, operates under an entirely different set of rules established by the Infrastructure Investment and Jobs Act of 2021 and subsequent IRS guidance. The 1099-K threshold change affects settlement networks, not the broker-reporting regime. Your crypto broker's cost-basis and proceeds reporting obligations are governed by the 1099-DA framework, not this update. For a detailed breakdown of that parallel reporting regime, see our article on Form 1099-DA and crypto basis requirements for US filers.
Peer-to-peer and "friends and family" payments
The IRS FAQ update also restates its longstanding position on personal transfers. Money received as a genuine gift or reimbursement between friends and family is not taxable income, but the burden of demonstrating that a payment was non-commercial falls on the taxpayer. For crypto users who rely on payment apps or on-chain settlement, the character of each receipt still matters regardless of whether a 1099-K is issued. The absence of a form does not mean the income is exempt.
Who Is a Third-Party Settlement Organization?
A TPSO is an entity that has a contractual obligation to make payments to participating payees in settlement of payment card or third-party network transactions. Payment apps, online marketplaces, and certain crypto-native payment processors can fall under this definition. The key question is whether the platform itself settles the transaction rather than merely connecting buyer and seller.
Platforms still deciding
Some platforms have been issuing 1099-Ks voluntarily at lower amounts while the legal landscape shifted. Now that the $20,000 / 200-transaction threshold is definitively restored by statute, platforms may reduce the volume of forms they send. Filers who previously received a 1099-K under a lower voluntary threshold may not receive one in future years. That does not change their underlying tax obligations: income is still income, and taxable disposals are still taxable.
What This Means If You Receive Crypto Payments for Goods or Services
If you accept crypto as payment for a product or service, you recognize ordinary income at the fair market value of the crypto on the date you receive it. That's the rule regardless of whether a 1099-K arrives. The threshold change simply affects whether a TPSO is obligated to report that income to the IRS on your behalf. Your own reporting obligation does not hinge on whether the form is issued.
Cost basis considerations
The crypto you receive as payment becomes your cost basis for the asset. When you later sell or exchange it, any appreciation or depreciation is a separate capital gain or loss. Tracking that basis accurately is essential, and it's a step that a 1099-K form does not help you with: the form reports gross receipts, not your subsequent disposal history.
Estimated tax and withholding
The IRS FAQ page explicitly links to guidance on estimated tax payments. If you're self-employed and receiving crypto as income, you likely owe quarterly estimated taxes on that income. The $20,000 threshold is irrelevant to whether you owe those payments: if you expect to owe at least $1,000 in federal tax for the year above what's withheld, the quarterly payment obligation applies. Missing those deadlines leads to an underpayment penalty.
Accounting and Compliance Implications
For individual filers
Don't let the higher threshold lull you into thinking the IRS has reduced your obligations. It hasn't. The change is purely about what TPSOs must report, not about what you must report on your own return. Every taxable crypto transaction still belongs on Schedule D (capital gains and losses) or Schedule 1 / Schedule C (ordinary income), as appropriate. If you've been relying on a 1099-K to prompt you to report, you need a better system: a complete transaction log that captures dates, amounts in USD at time of receipt, and disposal proceeds.
For accounting firms and CFOs
The threshold restoration simplifies the reconciliation workload in one narrow sense: fewer 1099-K forms from TPSO-categorized platforms means fewer discrepancies to trace back to the underlying ledger. But the fundamental compliance burden remains unchanged. Clients who receive crypto payments through TPSO platforms below the $20,000 / 200-transaction threshold will not receive a form, yet those receipts still need to be captured in the books and reported correctly. Build client-intake questionnaires that ask about payment-app receipts and crypto payment rails explicitly; don't assume a missing form means there's nothing to report. For the broader US legislative context shaping crypto tax obligations right now, the Senate Finance crypto tax bill is worth tracking alongside this IRS update.
Key Numbers at a Glance
| Rule in effect | Gross receipts threshold | Transaction count threshold |
|---|---|---|
| Pre-ARPA (before 2021) | $20,000 | More than 200 |
| ARPA 2021 (delayed repeatedly) | $600 | None |
| One Big Beautiful Bill (current) | $20,000 | More than 200 |
Both conditions must be met simultaneously for a TPSO to be required to file. Meeting only one does not trigger the reporting requirement.
Practical Steps to Take Now
The threshold is set. The FAQ is live. Here's what to do before the next filing season closes in on you.
Audit your payment channels
List every platform through which you receive crypto or fiat payments. For each one, determine whether it operates as a TPSO. Check whether you received a 1099-K last year under a lower voluntary threshold, and do not assume you'll receive one this year under the restored statutory threshold.
Keep your own records regardless
The IRS guidance is clear: recordkeeping is a taxpayer responsibility. Maintain a log of every receipt that includes the date, the payer, the amount in the currency received, and the USD fair market value at the time of receipt. For crypto, add the wallet address or transaction ID. These records support both your income reporting and your future capital-gains calculations. If you need to calculate crypto taxes accurately, a systematic approach to your transaction history is the only reliable foundation.
Review estimated tax payments
If you're receiving crypto as self-employment income, verify that your quarterly estimated tax payments reflect the actual income you're earning. The IRS underpayment penalty applies whether or not a 1099-K was issued for your receipts.
Talk to your clients before year-end
Accounting firms should flag this threshold change in client communications now. Some clients will incorrectly conclude that income below $20,000 via payment apps is not reportable. Correct that misunderstanding before the return is prepared, not after. The Digital Asset Tax Certainty Act moving through Congress could add further layers to these obligations before year-end, so staying current is important.
Frequently Asked Questions
Does the $20,000 threshold mean income below that amount is tax-free?
No. The threshold determines when a TPSO must issue a Form 1099-K. It has no bearing on whether the underlying income is taxable. All income, including crypto received as payment, is taxable regardless of whether a reporting form is issued.
I received crypto through a payment app. Is the app a TPSO?
It depends on how the app is structured. If the platform has a contractual obligation to settle transactions between buyers and sellers, it likely qualifies as a TPSO. Check the platform's terms of service or consult the IRS FAQs for guidance. When in doubt, treat the receipt as taxable income and keep records.
How does this differ from the Form 1099-DA broker reporting rules?
Form 1099-DA governs digital asset brokers and relates specifically to reporting proceeds and, eventually, cost basis on disposals. Form 1099-K governs third-party settlement organizations and reports gross receipts from payment transactions. They are separate frameworks with separate thresholds and separate obligations.
What records should I keep if I don't receive a 1099-K?
Keep a complete record of every payment received: the date, payer identity, amount in the currency received, and the USD fair market value at receipt. For crypto payments, include the transaction hash or wallet reference. These records support your income reporting and establish the cost basis of any crypto you later dispose of.
Are personal transfers between friends still excluded?
Personal transfers, genuine gifts, and non-commercial reimbursements are not taxable income. However, you bear the burden of demonstrating the non-commercial nature of the transfer if the IRS questions it. The restored $20,000 threshold does not change this characterization test: if you're conducting business and receiving payment, the income is taxable regardless of the amount or the form's issuance.
Source: IRS Newsroom, Form 1099-K FAQs