This New IRS Rule Affects Millions: Are You One of Them?
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This just in, it's now even easier for Uncle Sam to get a cut of your hard-earned money. That's right, there's a new IRS rule that's going to affect millions of Americans, and we're going to break it down today. We're going to look at exactly what's changed, what it means for you, and how you can avoid getting blindsided come tax time. So here's the scoop. The IRS has changed the rules on who gets a 1099-K form, which reports payments received through third-party platforms like eBay, Etsy, PayPal, ChatterPay, Zelle, Venmo, and Cash App. I

I made one of those up and you'll never know which one. That's how you know you have too many apps on the dance floor. Under the old rule, side hustlers had to make over 20 grand and have at least 200 transactions on one of these third-party platforms to get a 1099K form. So unless you were practically running a small country's economy on Etsy, you probably didn't get one.

But under the new rule, if you make over $600, even from a single transaction, you're likely getting a 1099K. And it applies to you whether you're washing cars, selling handmade candles, or pet-sitting your neighbor's demon chihuahua. Which means you'll have no choice but to report that income when you file your taxes. No more sliding it under the rug like you do with those long lunches at the office. We see you, Gary. It shouldn't take 90 minutes to eat your plain turkey sandwich with Doritos and a Mountain Dew. Even better.

if they're flaming hot limon. Not lemon, limon. Gotta be culturally appropriate when you're talking about your flaming hot flavors. Show some respect. Now, the important thing to understand is that this change is targeting payments received for business activity, not selling your air fryer on Facebook or birthday money from your grandma. The IRS isn't that petty.

although I would not put it past them to enact a grandma tax down the road. But if you're selling goods or services as part of a side hustle, then you'll likely find a 1099-K in your mailbox, courtesy of your friends at the IRS. So why is this happening?

Simple answer, the IRS wants more money. Longer answer, they're trying to close the tax gap, which is the difference between what people should be paying and what they actually report. You see, each year, the IRS misses out on hundreds of billions of dollars thanks to people under-reporting their taxable income. And you know what makes a massive chunk of that amount?

You guessed it, side hustles and online income. And that's why the IRS is starting to crack down on this stuff like Smokey the Bear on an unattended campfire. You see, this isn't a new tax. You've always been required to report every dollar you make from a side hustle or gig work. The only difference now is that there's a bigger paper trail. So when that 1099K shows up, don't freak out. You're not being targeted.

You're just getting the same treatment as everyone else with a side hustle. Which brings us to our next question. When is this happening? Well, this rule change has been the IRS's version of a Marvel movie release date. Announced, delayed, teased, and delayed again. It was originally supposed to go live in 2022, but then it got postponed to 2023, then it got delayed again. And finally, the IRS has settled on a plan to phase in this new policy over the next few years.

So here's what that looks like. For the taxes you filed in 2025, you only got a 1099K if you earned over $5,000 on those payment platforms. When you file taxes next year in 2026, you'll get a 1099K if you earned over $2,500 with a side hustle. And when you file in 2027, the minimum dollar amount will officially make the drop to that $600. And yes, that is the final number. No ifs, ands, maybes, or buts. The IRS is officially a butt-free zone in 2027.

But... And that brings us to the most important question of all. What the heck does that mean for you? Well, for starters, there's no need to bury your candle-making profits in the backyard or flee the country. But while you shouldn't panic, you should make a plan. And there are four simple steps to take.

But first, let's talk about a bonus step to take with all that side hustle cash you're making, besides giving some of it to the IRS. I'm talking about a high yield savings account with online bank, Laurel Road, one of the sponsors of today's video. They offer top tier APY, so your money can grow a lot faster than it would with a traditional brick and mortar bank. I use Laurel Road because they never charge monthly maintenance fees, my deposits are FDIC insured, and best of all, there's no minimum balance required to open an account, which means there's no excuse to keep letting your savings sit around doing nothing.

Head to laurelroad.com slash george to get started or click the link in the description below. Okay, here are the four steps that will help you prepare. Step number one, know what you owe. If you made a profit from your side hustle, congratulations, you're officially self-employed, at least in the eyes of the IRS. Now, does that mean you get a badge or a secret handshake like your homeschooled friends in the Cub Scouts? Nope.

just some extra taxes. That's seriously a real bummer. And that's because side hustle income is subject to two types of tax, income tax, just like your nine to five, and self-employment tax, which covers Social Security and Medicare. Now, normally your employer pays half of this,

But when you're self-employed, you're the boss and the employee. So you pay the full amount, likely 15.3% in your case. So how much should you expect to owe? Well, a solid rule of thumb is to set aside 30% of your side hustle profit for taxes. And that means the money you make after expenses. So let's walk through an example. If you made $10,000 and you spent $2,000 on legitimate business costs like gear and travel, you would owe taxes $1,000.

on $8,000. So you'd want to set aside between $2,000 and $2,400 to cover the taxes on that $8,000. Step number two, minimize what you owe. The silver lining with all of this is that you can deduct actual business expenses from your taxable side hustle income.

And no, this doesn't mean treat yourself purchases disguised as a business expense. I'm talking about legitimate IRS approved deductions like car mileage for business travel, the business portion of your cell phone, software or subscriptions that you use for your side hustle, office supplies, technology and shipping costs.

And pro tip, the IRS is a big believer in picks or it didn't happen, bro. So keep your receipts organized. Don't just shove everything in a junk drawer and hope you'll be able to find it during an audit. Step number three, make quarterly payments. If your side hustle is making consistent cash, you might owe taxes before April 15th. And that's because the IRS does not like to wait.

What does that mean for you? Well, if you expect to owe more than $1,000 in taxes from your side hustle this year, you'll probably need to make estimated quarterly payments, aka four mini tax bills spread throughout the year. Here's what that looks like. First, at the end of each quarter, do the math to see how much profit you made. Then multiply that number by 30% to see what you would need to pay in estimated taxes. And finally, hop on the IRS website and make that estimated payment.

And surprisingly, they make this super easy. And to prove it to you, I'll go through the process myself. Write me up. Here's what you do. Go to irs.gov slash payments. And then we're going to go to direct pay with bank account to avoid any fees associated.

Then we're going to go pay individual tax because I'm not a legitimate business. This is just some side hustle money. So I'm going to click pay individual tax. Next, I'm going to click make a payment. Then it's going to take me to a new page where I select the reason for payment. I'm going to scroll down to estimated tax. And yep, for tax period 2025, hit continue. And you're going to continue to fill out your tax year, verification, filing status, name, all the blah, blah, blah, blah, blah, blah, blah.

You get it. The whole process shouldn't take you more than five to ten minutes, which is about half the time it takes to complete one step of assembling an IKEA couch. So you can do this. It's just one Allen wrench for this whole thing? You gotta be kidding me. Now, I will say that it can be risky to take a best guess at how much you need to pay on your estimated taxes, especially if you have a complicated tax situation or you're making serious money. Because if you underestimate the amount you owe and wind up not paying enough throughout the year, the IRS could hit you with a penalty. It's stupid.

I know, tomfoolery, some would even say, but this is reality. And luckily there's a much safer option, which brings us to our fourth and final step.

hire a professional. When your side hustle income goes from a fun little thing to, wait, this might actually pay my mortgage, it's time to bring in a tax professional. And a good tax pro can save you a ton of stress during tax season by maximizing your deductions, helping you avoid IRS penalties, and setting up your business structure, like an LLC or an S-Corp, if it makes sense. And don't worry, they've probably already worked with someone who makes $200 a month creating artisanal glitter bombs for bachelorette parties. You're not going to shock these people.

Now, where do you find a good tax pro? I got you. I'm going to drop a link in the description to a network of tax pros I trust. Now, at the end of the day, this IRS change is not a crisis. It's just a little more paperwork. So if you've got a side hustle, start tracking your income and expenses now so that you're not blindsided next tax season when that 1099K rolls in.

And if your idea of a filing system is just stuffing receipts into a glove compartment, this is your sign to start fresh. But this is not the only big change that could affect your taxes next year. I recently made this video breaking down eight other IRS changes that could help you keep more of your hard-earned cash moving forward. So keep watching to check it out or click the link in the description below. That's all for today. If you enjoyed the video, please hit the like button, hit the subscribe button, and we'll see you next time.