Payment Transactions and Form 1099-K

What Is Form 1099-K?

Form 1099-K is issued for third party network transactions by merchant acquirers and third-party settlement organizations (TPSO) as a payment settlement entity (e.g. credit card company, Venmo, PayPal, Cash App). In other words, if you use an app to send or receive money, you may get a 1099-K.

• The Zelle® platform does not report payments to the IRS, nor does Zelle® issue a 1099-K.
• If you use an online platform to receive money over a certain annual limit, then a Form 1099-K is issued.
• Learn what to do if you received Form 1099-K.

Why Did I Get a 1099-K?

If you as a taxpayer or business owner have received Form 1099-K, it is because:

• You accepted payments via credit cards or third-party networks (Venmo, PayPal, Cash App, etc.) for goods or services that exceeded $5,000 for the 2023 tax year (review the table below for a threshold breakdown by year).
• You are self-employed or have a business and receive payments through an online platform for your services. Read this tax guide for business for more information.
• You received payments related to your activities in the gig economy. This could be from driving a car for booked rides or deliveries, renting out property or equipment, selling goods online, or you provide other temporary, on-demand or freelance work.
• You sold personal items with a loss or a gain.
  • If you sold a personal item at a loss, eFile can help you report if on Form 1040 and Schedule 1. Add this amount to Other Income on Schedule 1, Part 1 - Line 8z - Other Income with the description "Form 1099-K Personal Item Sold at a Loss."
• You received the form by mistake or with incorrect information (contact the issuer immediately to get this corrected).

If you received payment via an online payment app for your service, you may receive a 1099-K. See how to add your business and income to your eFile account where you can add your 1099-NEC, 1099-MISC, and 1099-K income forms. eFile.com is up to 60% less than popular tax preparation platforms for the self-employed.

In many cases, you may get a 1099-K unexpectedly for selling goods or other properties online, such as:

• Reselling popular concert tickets at a significant gain
• Selling collectibles or other rare assets at a high price.

What Is a Third-Party Network or Platform?

Third-party payment networks, also known as third-party settlement organizations, can include a variety of platforms such as:

• Auction websites
• Car sharing services
• Craft and maker marketplaces
• Crowdfunding platforms
• Freelance marketplaces or job boards
• Online marketplaces for clothing, furniture, and other goods
• Peer-to-peer payment systems or digital wallets
• Real estate platforms or a marketplace
• Ticket resale sites.

Think of them as a marketplace or Fleamarket where sellers - often individuals trying to make some money - go to in order to sell their property or asset to another individual. These can also be a business owner selling their product at the same marketplace.

When Is Form 1099-K Required?

For 2024, a TPSO is required to report third-party network transactions paid during the year with any participating payee that exceed a minimum threshold of $5,000 in aggregate payments, regardless of the number of transactions. This is to phase into the $600 limit, possibly in the following year.

Important: Refer to the table below for 1099-K filing requirements by year.

1099-K forms are to be sent to you by January 31st of the year following the calendar year for which the payments were made. As a recipient of a 1099-K, this is required to be filed with your 1040 individual income tax return - review Tax Day deadlines for individuals. Learn more about starting a business and keeping records.

When you prepare your taxes on eFile.com, you can simply enter some figures from your Form 1099-K and the tax app will calculate and report the information on the tax return.

Is There an IRS $600 Bank Surveillance?

The IRS is not snooping through your bank account for payments or transactions of $600 or more. This myth was part of a proposed decrease to the filing requirements for Form 1099-K described on this page. Under the changes, the threshold is much lower than in previous years so many of your online transactions may count towards your taxable income.

This does not mean all transactions are subject to taxes; the tax is only for qualifying transactions for business activity or income from selling property. The following table details what transactions may be taxable and what may not be.

If you wrongly receive a 1099-K for income that was not supposed to be reported, you can request a new form from the issuer or report it on your return as wrong. Most apps have an option to toggle whether you are sending money for personal use or business use.

To explain more, review the myths on Form 1099-K below:

What Do I Do with Form 1099-K?

If you have received 1099-K and are unsure of what to do with it, refer to the points below before you file your taxes online with eFile.com.

• Compare the amount listed on Form 1099-K with your payment card receipt records and merchant statement(s).
• Check if the Taxpayer Identification Number or TIN is correct and if the Merchant Category Code (MCC) describes your business correctly if applicable. The TIN may also be an SSN or EIN (Employer Identification Number).
• Verify whether you have reported income from all forms of payment received, including cash, checks, debit, credit, and stored-value card transactions.
• Maintain records and documentation that support both the income and deductions you report on your tax return.

How to Report Form 1099-K on Your Tax Return?

You will first need to determine what type of income the amount on your 1099-K is for:

• Business: If you’re are part of the gig economy, sole proprietor or an independent contractor, you’ll report the 1099-K income via Schedule C Self Employment (Form 1040), line 1 and any returns or allowances on Schedule C, line 2. Additionally, you must calculate the cost of goods sold and report that on Schedule C, line 4. Then deduct associated business expenses in Part II of Schedule C.
• Hobby: You’ll report your gross hobby income on Schedule 1 as part of the 1040, and include the Form 1099-K’s issuer’s name and EIN. Please use the Misc. Income page on eFile.com to enter hobby income.
• Sale of a personal item: Report it under Other Miscellaneous Income (not 1099-MISC) in the eFile.com tax app and add description that you sold a Personal Item at a gain or loss.

Contact us with questions.

Have your 1099-K and all other tax forms handy when you sign into your eFile account. Work through the tax interview and file your taxes online for free or at an affordable price.

See a list of other 1099 forms you might receive for a given tax year.

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