PayPal sends you a Form 1099-K when you receive more than 20,000 dollars and more than 200 payments for goods and services in a calendar year. Five states are lower: Vermont, Massachusetts, Virginia and Maryland at 600 dollars, and Illinois at over 1,000 dollars with four or more payments.
If you've read that PayPal reports everything over 600 dollars, that was the plan for a while, and it never fully happened. The rule changed in 2025, and plenty of websites still haven't caught up. Here's the current position from PayPal and the IRS, and what to do if a form lands in your inbox.
The PayPal 1099-K threshold
| Where you live | You get a PayPal 1099-K when goods and services payments... |
|---|---|
| Most states (federal rule) | exceed 20,000 dollars AND more than 200 transactions |
| Vermont, Massachusetts, Virginia, Maryland | reach 600 dollars, any number of transactions |
| Illinois | exceed 1,000 dollars and four or more transactions |
| Anywhere, if backup withholding applied | any amount |
PayPal works out your state from your primary address on the last day of the previous tax year, so moving mid-year doesn't change which rule applies until the following year.
Why you may have heard 600 dollars
The American Rescue Plan Act of 2021 cut the threshold to 600 dollars. The IRS then delayed it more than once while it phased things in. The One Big Beautiful Bill Act restored the old 20,000 dollar and 200 transaction rule, and the IRS says it did so retroactively. So for federal purposes, 600 dollars is now only a state figure in a handful of places.
Which payments count
Only payments marked as goods and services. Paying a friend back for dinner, a gift or a shared trip doesn't count. The catch is the tag: PayPal says a payment is reportable when the sender marks it as goods and services, even if that was a mistake. Being reportable doesn't make it taxable, but it can put money on your form that isn't income, so keep notes.
The catch: lower forms and several forms
The IRS says payment apps may send a 1099-K for lower amounts than the threshold, and if you sell on several platforms you can get more than one form. And if your customers pay you directly by card, the card processor sends a 1099-K whatever the amount. Separately, a 1099-K can arrive at any amount if backup withholding was applied at 24% because PayPal didn't have your tax details.
What to do when your PayPal 1099-K arrives
- Download it from the PayPal Statements and Tax Center around January 31; PayPal emails when it's ready.
- Check the total against your own sales records.
- Separate out anything that wasn't income, like a friend's payment tagged by mistake or refunds.
- Report your income and costs on your return; the gross figure on the form isn't your profit.
- Keep the form and your workings in case the IRS asks.
No form? You still report
This is the bit I'd underline. The IRS says that whether or not you receive a Form 1099-K, you must report your income, including personal items sold at a gain. The threshold only decides who gets paperwork, not who pays tax.
Crypto and PayPal
If you accept crypto such as PYUSD for goods and services and meet the threshold, PayPal sends a separate 1099-K for those transactions.
PayPal 1099-K examples
| Seller | Goods and services payments | Gets a PayPal 1099-K? |
|---|---|---|
| Lives in Texas, 300 sales worth 18,000 dollars | Under 20,000 dollars | No |
| Lives in Ohio, 180 sales worth 22,000 dollars | Under 200 transactions | No |
| Lives in Maryland, 12 sales worth 600 dollars | Meets the state rule | Yes |
| Lives in Illinois, five sales worth 1,200 dollars | Over 1,000 dollars and four or more | Yes |
The first two mirror the examples Venmo uses for the same rule; PayPal and Venmo report the same way. Remember the form is based on gross payments, so it can include shipping you charged, fees PayPal took and refunds you later gave. That's why the figure rarely matches your bank account, and why you subtract costs on your return.
Give PayPal your tax details early
PayPal asks for your EIN, ITIN or SSN as you approach the threshold. If your details fail verification, it'll ask for a W-9 form, and if your name and tax ID don't match IRS records you may get a notice asking for more information. Sorting this out early is what keeps the 24% backup withholding off your sales.
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My verdict
For most casual sellers, the 20,000 dollar rule means no PayPal form. That's a relief on paperwork, not on tax. Tag payments correctly, give PayPal your tax ID early to avoid the 24% hold, and keep your own records. For more on running payments as a business, see Stripe vs PayPal and PayPal vs Venmo, plus my freelancer tips.
Frequently asked questions
What is the PayPal 1099-K threshold?
Federally, more than 20,000 dollars and more than 200 goods and services transactions in a calendar year. Vermont, Massachusetts, Virginia and Maryland use 600 dollars, and Illinois over 1,000 dollars with four or more transactions.
Is the 1099-K threshold still 600 dollars?
Not federally. The One Big Beautiful Bill Act restored the 20,000 dollar and 200 transaction rule, and the IRS says it applies retroactively.
Does PayPal report friends and family payments?
No. PayPal says only goods and services payments count, though a payment tagged as goods and services by mistake is still reportable.
Does Illinois have a different PayPal 1099-K rule?
Yes. PayPal lists Illinois at over 1,000 dollars in goods and services payments with four or more transactions.
When will I get my PayPal 1099-K?
PayPal says around January 31, in the Statements and Tax Center, with an email when it's ready.
Why doesn't my PayPal 1099-K match my bank deposits?
The form shows gross payments, so it can include shipping, fees PayPal took and refunds. Subtract your costs and refunds on your return.
Do I owe tax if I don't get a 1099-K?
If the money is income, yes. The IRS says you must report income whether or not you receive the form.
