If you’re an independent contractor, freelancer, or even someone who gets paid through apps such as Venmo, the IRS recently did two things that you should be aware of. The new regulations will reduce their use of paper but require more effort on your part to get your books into compliance. Let’s walk through what’s new and how it affects you.
Change 1: Venmo-type payment apps go back to older rules
Do you recall being informed that Venmo or PayPal would start sending your earnings to the IRS if you earned over $600 in business payments? No more.
Here’s what happened:
- Previously: Payment apps themselves needed to report your earnings to the IRS if you had over 200 transactions and over $20,000 in business earnings.
- Then: In 2021, it fell to a mere $600, regardless of the number of transactions.
- Now: The IRS is abolishing that $600 threshold and going back to the original threshold — more than 200 transactions and $20,000 or more.
So, if you’re a freelancer or side hustler earning money on Venmo, Zelle, or Cash App, your business income will no longer have to be reported to the IRS — if you remain below that high cap.
Change 2: Businesses just got it easier to handle 1099 rules
You’re a business owner, and you’ve paid vendors or contractors. You’ve probably had to fill out 1099-MISC or 1099-NEC forms to report these payments to the IRS.
Here’s the change:
- Previous rule: You scribbled down all you paid $600 or more during the previous year.
- New rule: Beginning after Dec. 31, 2025, you’ll write down people you paid $2,000 or more last year.
- And it will increase with inflation down the line.
This matters to businesses, small businesses especially. They won’t be sending out nearly as many 1099s anymore, which will be less problematic and less opportunity to mess it up and get caught.
So what does this all mean for you?
These changes mean less paperwork for businesses and apps. But if you’re someone who earns money this way, you’ll have less third-party proof of your income when it’s time to file your taxes.
You’ll still need to report all your income honestly — even if the IRS doesn’t have a record of it.
Read this later
How can I avoid scams during tax season?
But here’s the catch:
With fewer firms and plans reporting, the IRS will collect less tax revenue — some less than $13 billion in 10 years, according to experts. Why? Because if no one else is reporting your income, it’s simpler to leave something off or “forget.”
If you’re a W-2 employee with a regular paycheck, there’s not much to it. But if you’re an independent contractor, a freelancer, or a gig worker, the IRS is counting on you to be truthful and to keep your own records. Keep good records — and if unsure, seek a tax pro.
