Form 1099-K Thresholds for Expats Explained: OBBB Reverts Reporting to $20,000
The Form 1099-K reporting threshold for third-party payment apps (PayPal, Venmo, Cash App, Stripe, and online marketplaces like Etsy and eBay) has been permanently set at $20,000 in gross payments AND more than 200 transactions per year. The One Big Beautiful Bill Act (OBBB), signed July 4, 2025, retroactively repealed the lower thresholds planned under the American Rescue Plan Act, eliminating the $2,500 threshold for 2025 and the $600 threshold for 2026 before either took full effect.
According to the IRS, third-party settlement organizations (TPSOs) are not required to file Form 1099-K unless both conditions are met: gross payments exceed $20,000 AND more than 200 transactions occur. Payment card transactions (credit and debit cards) have no minimum threshold and are always reported regardless of amount.
For American expats who freelance, sell goods online, or receive payments through U.S.-based platforms, this means significantly fewer 1099-K forms. However, all income remains taxable regardless of whether you receive a 1099-K. The Foreign Earned Income Exclusion ($130,000 for 2025) can eliminate federal income tax on earned income, though self-employment tax (15.3%) still applies. Here’s how the thresholds work, what to do if you receive an incorrect 1099-K, and how expats report this income.
Received a Form 1099-K or Expecting One?
How Did the 1099-K Threshold Change?
The 1099-K threshold has been a moving target since 2021. Here’s the full timeline:
| Tax Year | TPSO Threshold | Transaction Minimum | Status |
|---|---|---|---|
| 2021 and earlier | $20,000 | 200 transactions | Original rule |
| 2022 | $600 (planned under ARPA) | None | IRS delayed; $20,000 remained |
| 2023 | $600 (planned) | None | IRS delayed again; $20,000 remained |
| 2024 | $5,000 (IRS transition) | None | Phased implementation |
| 2025 (planned) | $2,500 (IRS transition) | None | Killed by OBBB |
| 2025 (actual, OBBB) | $20,000 | 200 transactions | Retroactively reinstated |
| 2026 and beyond | $20,000 | 200 transactions | Permanent under OBBB |
The OBBB retroactively reinstated the pre-ARPA threshold all the way back to 2022. This means the $600 threshold never legally took effect for any tax year.
How Do the Current Thresholds Work?
The rules differ depending on how you receive payments:
Third-Party Settlement Organizations (TPSOs)
TPSOs include payment apps (PayPal, Venmo, Cash App, Wise), online marketplaces (Etsy, eBay, Amazon Marketplace), and gig platforms (Upwork, Fiverr). A TPSO must issue Form 1099-K only when both conditions are met:
- Total gross payments for goods or services exceed $20,000, AND
- You have more than 200 transactions
Both conditions must be met. If you receive $25,000 through 150 transactions, no 1099-K is required from the TPSO. If you have 250 transactions totaling $15,000, no 1099-K is required either.
Payment Cards (Credit/Debit Cards)
Payment card processors (Square, Stripe, credit card processing, merchant accounts) have no minimum threshold. If you accept a single credit card payment of $1, the processor must report it on Form 1099-K.
State Thresholds May Be Lower
Some states impose lower 1099-K reporting thresholds than the federal standard. You may receive a Form 1099-K even if you don’t meet the federal threshold if your state has a lower requirement. Common lower-threshold states include Massachusetts, Vermont, Virginia, Maryland, and the District of Columbia.
What Does Form 1099-K Report?
Form 1099-K reports the gross payment amount in Box 1a. This is the total dollar amount of all reportable payment transactions. It does not adjust for:
- Platform fees or commissions
- Refunds or chargebacks
- Shipping costs
- Discounts or credits
This means the amount on your 1099-K will be higher than your actual profit. You account for expenses, fees, and deductions separately on Schedule C.
Example: You’re a freelance web developer in Lisbon who earned $22,000 through 210 PayPal transactions. PayPal deducted $660 in fees. Your 1099-K shows $22,000 (gross), but your actual income is $21,340. You report the $22,000 on Schedule C, Line 1, and deduct the $660 in fees as a business expense.
Who Receives a Form 1099-K?
You may receive a Form 1099-K if you:
- Freelance for clients who pay through payment apps or online platforms
- Sell goods through online marketplaces (Etsy, eBay, Amazon, Poshmark)
- Provide digital services and receive payment through Stripe, Square, or similar processors
- Accept credit or debit card payments for any amount through your business
- Operate an e-commerce business while living abroad
- Drive for ride-share or delivery platforms that process payments through a TPSO
You will not receive a Form 1099-K for:
- Personal payments (splitting dinner, sending money to family)
- Gifts sent through payment apps
- Reimbursements (your roommate’s share of rent)
- Selling personal items at a loss
How Do I Report 1099-K Income on My Expat Tax Return?
When you receive a Form 1099-K for business income, report it using these forms:
| Form | Purpose |
|---|---|
| Schedule C | Report gross income and deductible business expenses |
| Schedule SE | Calculate self-employment tax (15.3%) |
| Schedule 1 | Report business income on your Form 1040 |
| Form 2555 | Claim the FEIE (if using the exclusion strategy) |
| Form 1116 | Claim the Foreign Tax Credit (if using the credit strategy) |
Step by step:
- Report the gross amount from Box 1a of your 1099-K on Schedule C, Line 1
- Deduct legitimate business expenses (platform fees, software, equipment, home office) on Schedule C
- Your net profit flows to Schedule 1, then to Form 1040
- Calculate self-employment tax on Schedule SE
- Claim the FEIE (Form 2555) or FTC (Form 1116) to reduce or eliminate federal income tax
How Expats Reduce or Eliminate Tax on 1099-K Income
Foreign Earned Income Exclusion (FEIE)
The FEIE excludes up to $130,000 (2025) of foreign earned income from federal income tax. For freelancers and self-employed expats earning under the exclusion limit, this often eliminates federal income tax entirely.
Example: Mia is a freelance designer living in Bali. She earns $75,000 through PayPal and Stripe in 2025. After claiming the FEIE, her federal income tax is $0. She still owes approximately $10,600 in self-employment tax (15.3% on 92.35% of net earnings).
The FEIE does not eliminate self-employment tax. This is the most common surprise for expat freelancers.
Foreign Tax Credit (FTC)
If you live in a country with income tax rates equal to or higher than U.S. rates (UK, Germany, France, Canada, Australia, Japan), the Foreign Tax Credit often produces a better result than the FEIE. The FTC credits foreign taxes paid dollar-for-dollar against your U.S. liability.
Totalization Agreements for Self-Employment Tax
If your country has a totalization agreement with the U.S. and you’re paying into that country’s social security system, you may be exempt from U.S. self-employment tax entirely. About 30 countries have these agreements, including the UK, Germany, Canada, Australia, Japan, France, and South Korea.
For a comparison of which strategy works best for your situation, see our FEIE vs. FTC guide.
What If I Receive an Incorrect Form 1099-K?
Incorrect 1099-K forms are common, especially for expats who use payment apps for both personal and business transactions. Common errors include:
- Personal payments reported as business income: Gifts, reimbursements, and rent splits are not taxable income
- Selling personal items at a loss: If you sold a used laptop for $500 that you bought for $1,200, you have no taxable gain
- Currency conversion errors: Platform exchange rates may differ from IRS rates
- Duplicate reporting: The same income is reported on both a 1099-K and a 1099-NEC
How to fix it:
- Contact the payment platform (listed in the upper left of the form) and request a corrected 1099-K
- If the platform won’t correct it, report the incorrect amount on Schedule 1 (Form 1040) and make an offsetting adjustment to zero out the non-taxable portion
- Keep documentation (screenshots, transaction records) proving the payments were personal, not business income
Example: Your roommate sent you $6,000 through Venmo for their share of rent. You receive a 1099-K including this amount. On Schedule 1, report $6,000 and make an offsetting entry to reduce it to $0 of taxable income. Keep the Venmo transaction records showing the payment was a reimbursement.
What About Backup Withholding?
If you haven’t provided your correct SSN or ITIN to a payment platform, or if the name on your account doesn’t match IRS records, the platform may apply backup withholding at 24% on your payments.
For expats, this most commonly happens when:
- Your payment platform has an old U.S. address on file
- You opened the account with an ITIN and later received an SSN (or vice versa)
- Your legal name has changed and doesn’t match the platform’s records
If backup withholding was applied, the withheld amount appears in Box 4 of your Form 1099-K. Report this on your Form 1040 as federal income tax withheld. It credits against your total tax liability, and you’ll receive a refund if too much was withheld.
Prevention: Update your SSN and legal name on all U.S. payment platforms before year-end to avoid backup withholding for the following year.
Also New: 1099-NEC and 1099-MISC Threshold Rising to $2,000
Starting with payments made in 2026, the OBBB also raises the reporting thresholds for Forms 1099-NEC (nonemployee compensation) and 1099-MISC from $600 to $2,000. This threshold will be adjusted for inflation starting in 2027.
This means U.S. clients paying you for freelance work won’t be required to issue a 1099-NEC unless they pay you $2,000 or more in a calendar year (starting 2026). For the 2025 tax year, the $600 threshold still applies to 1099-NEC and 1099-MISC.
Frequently Asked Questions
Yes. All income is taxable regardless of whether a 1099-K is issued. The 1099-K is an information return for the IRS, not a prerequisite for reporting income. If you earn $15,000 through PayPal but don’t meet the $20,000/200 transaction threshold, you must still report that $15,000 on your tax return.
No. Foreign payment platforms (such as Wise for business payments, Revolut, or local country payment systems) are generally not TPSOs under U.S. law and are not required to issue Form 1099-K. You must still report all income received through these platforms on your U.S. return.
No. If you sold a personal item at a loss (for less than your original purchase price), there is no taxable gain. You may still receive a 1099-K for the gross proceeds. Report the amount and make an offsetting adjustment on Schedule 1 to show no gain. Losses on personal items are not deductible.
The FEIE can eliminate federal income tax on earned income (freelance work, consulting, services) up to $130,000 for 2025. It does not eliminate self-employment tax (15.3%). If your 1099-K income is from selling goods (inventory, products), the FEIE applies only to the labor component, not to the profit from inventory sales.
Report the full gross amount from the 1099-K, then make adjustments on your return to separate business income from personal (non-taxable) transactions. Document which transactions were personal using platform records and screenshots. Report business income on Schedule C and offset personal amounts on Schedule 1.
Under the OBBB, the $20,000/200 transaction threshold for TPSOs is permanent. There is no sunset date or planned reduction. State thresholds may still differ and could change independently.
If you expect to owe $1,000 or more in tax for the year (including self-employment tax), you should make quarterly estimated payments to avoid underpayment penalties. The FEIE eliminates income tax but not SE tax, so many expat freelancers still owe quarterly SE tax payments.
At Greenback, we prepare tax returns for freelancers, digital nomads, and self-employed expats who receive 1099-K forms from U.S. payment platforms. We handle the Schedule C, coordinate the FEIE or FTC strategy, calculate self-employment tax (including totalization agreement exemptions), and make sure incorrect 1099-K amounts are properly adjusted on your return.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions about 1099-K reporting or working with Greenback, contact our Customer Champions.
Report Your Income the Right Way
This article is for informational purposes only and should not be considered tax advice. Form 1099-K thresholds have changed multiple times in recent years, and state rules may differ from federal requirements. For the latest IRS guidance, see the IRS Form 1099-K FAQ page and IRS Fact Sheet 2025-08. Always consult with a qualified tax professional regarding your specific situation.
Related Resources
- 1099 Forms for U.S. Expats
- Schedule C for Expat Business Owners
- Self-Employment Tax for U.S. Expats
- Foreign Earned Income Exclusion
- FEIE vs. FTC: Which Strategy Saves You More?
- Foreign Tax Credit Guide
- Totalization Agreements and Expat Taxes
- Digital Nomad Taxes
- Quarterly Estimated Tax Payments (Form 1040-ES)
- OBBB Tax Policy Changes for Expats
