61% of Gig Workers Unprepared for New 1099-K Reporting Rules

If you're earning money through gig work, freelancing, or selling online, there's a 61% chance you're about to be blindsided by new tax reporting requirements.

According to a bombshell survey released by Avalara in January 2025, the vast majority of gig economy workers have no idea that IRS 1099-K reporting thresholds have changed dramatically—and tax season 2025 is happening right now.

The Survey That Exposed a Massive Knowledge Gap

Avalara, a leading tax compliance automation provider, surveyed 1,001 U.S. gig economy workers in mid-January 2025. The results reveal a crisis of confusion:

What Actually Changed (And Why It Matters)

Congress voted to reduce the 1099-K reporting threshold from $20,000 down to $600—a massive 97% reduction. But after delays and pushback, the IRS announced a three-year phase-in:

• 2025 tax season: $5,000 threshold (CURRENT)
• 2026 tax season: $2,500 threshold
• 2027 tax season: $600 threshold (final)

If you earned more than $5,000 through platforms like Uber, DoorDash, Etsy, eBay, Airbnb, or payment apps like PayPal and Venmo in 2024, you'll receive a 1099-K form and must report that income to the IRS.

How Gig Workers Are Reacting (Spoiler: It's Chaos)

The Avalara survey revealed some concerning behavioral responses to the new rules:

Tax Evasion Risks

• 20% plan to take on more "under-the-table" work to avoid reporting
• 15% will switch to Zelle (which doesn't report to IRS like PayPal/Venmo)
• 20% are quitting one or more gig jobs to stay below the threshold

Legitimate Responses

• 21% will hire a tax professional for the first time
• 15% will use tax software for the first time
• 19% are changing their earnings strategy

Extreme Reactions

• 16% are leaving the gig economy altogether
• 40% will take on MORE gig jobs (potentially increasing tax complexity)

What Financial Outcomes Do Gig Workers Expect?

When asked how they think they'll fare after tax season, responses were all over the map:

• 37% think their business will be profitable
• 36% expect to break even
• 17% predict they'll lose money due to the IRS changes

The split predictions suggest deep uncertainty about the actual tax impact—which is exactly what happens when 61% of people don't understand the rules in the first place.

The Expert Take: Why This Matters

Kael Kelly, General Manager at Avalara 1099 & W-9, summed up the crisis perfectly:

"Our survey data reveals the urgent need for basic knowledge and orderly direction on the part of gig economy workers to determine how best to comply with the lowered 1099-K digital payments threshold. This scrappy segment of our economy demonstrates DIY drive in creating a living from engaging in multiple jobs, non-traditional work, and sometimes essential services that support how consumers want to buy and receive goods and services—and they're now faced with the additional challenge of sorting out new, last-minute tax regulations and reporting requirements."

What You Need to Do Right Now

If you earned more than $5,000 through gig platforms or payment apps in 2024, here's your action plan:

1. Expect a 1099-K form in the mail (or electronically) from each platform where you exceeded the threshold
2. Don't panic—receiving a 1099-K doesn't automatically mean you owe more taxes; it just means the IRS knows about your income
3. Track ALL your income, not just what's on 1099-K forms (remember: you're legally required to report everything)
4. Document your expenses—gig workers can deduct mileage, supplies, equipment, home office, and other business expenses
5. Calculate quarterly taxes—if you expect to owe $1,000+ in taxes, you should be paying quarterly to avoid penalties
6. Consider professional help—21% of gig workers are hiring accountants this year for good reason

The Bigger Picture: Where This Is Heading

The confusion around the $5,000 threshold in 2025 is just the beginning. Next year, the threshold drops to $2,500. The year after that: $600.

That means if you make just $600 from any gig work, online sales, or digital payments, you'll get a 1099-K. At that level, virtually every side hustler in America will be receiving tax forms.

The IRS is tightening the net on unreported income, and gig workers need to adapt—fast.

Key Takeaways

Don't get caught unprepared. Whether you're driving for Uber, selling on Etsy, delivering for DoorDash, or renting on Airbnb, the rules have changed—and the 2025 tax season is happening right now.

Start tracking your income and expenses today so you're not scrambling in April.