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UPDATE 11/21/2023: IRS issues revised Form 1099-K reporting guidance and tax Fact Sheet. Read the IRS’s news release for more details.

Published:   |   Last Updated: February 20, 2024

I received a Form 1099-K

As part of the American Rescue Plan Act of 2021, the Form 1099-K reporting threshold for payments made by third party settlement organizations (TPSOs) decreased to payments exceeding $600. Previously, TPSOs were only required to report transactions on Form 1099-K, Payment Card and Third Party Network Transactions, for payees who received more than $20,000 and had 200 or more transactions.

There is no change to the taxability of income; the only change is to the reporting rules for Form 1099-K by TPSOs. Like before, income from part-time work, side jobs, or the sale of goods or services is still generally taxable.

Taxpayers must report all income on their tax return unless it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K; or any other information return.

 

1099k

What do I need to know?

What is a Form 1099-K?

  • Form 1099-K is an IRS information return. It contains information about the gross payments processed by the TPSO on behalf of the taxpayer. The TPSO files the Form 1099-K with the IRS, and the taxpayer receives a copy by January 31 of the following year.
  • Form 1099-K is used to report payments for goods and services, which may include payments received via business, self-employment, participation in the gig economy, or sale of personal items or assets.
    • The gig economy refers to activity where people earn income by providing “on-demand” work, services, or goods (such as driving a car for deliveries). Visit the Gig Economy Tax Center for more information.

When is Form 1099-K issued?

  • All TPSOs, including third-party payment applications and online marketplaces, are required to issue a Form 1099-K when gross payments for goods or services exceed $600. The Form 1099-K reporting rule applies only to payments made for goods and services. It doesn’t apply to personal payments to friends and family (including payments that were gifts or repayment of shared expenses).
  • Taxpayers will receive a Form 1099-K from each TPSO that made payments to them exceeding the $600 threshold by January 31 of the following year.

What payments are reported on a Form 1099-K?

A Form 1099-K reports the gross amount of payments from credit cards, digital payments via TPSOs, and freelance platforms that manage payments between two parties.  A separate Form 1099-K is issued by each payor.are

If I’m a teen who had a side gig or sold products online and received a Form 1099-K, will I need to file a tax return?

If you had a side gig or online shop or sold items through an online marketplace and received a Form 1099-K, you must file a tax return if any of the following apply:

  1. If your parent (or someone else) can claim you as a dependent and your earned income was more than $12,950, or
  2. If your net income from Form 1099-K sources exceeds $400, even if you don’t receive a Form 1099-K. You will need to file a tax return with a Schedule SE and pay self-employment tax on that income. (see below)

As of tax year 2023, TPSOs will issue a Form 1099-K to all people who receive payments of more than $600  for “goods and services” sold. However, if you are selling used items and sold the items for less than their original purchase price, see What should I do? How should I report the sale of personal property reported on Form 1099-K?

Is the income reported on a Form 1099-K subject to self-employment tax?

In most instances, the answer is yes. An individual whose net income is $400 or more is subject to self-employment tax and federal income tax, and you will need to file a Schedule SE with your tax return. For more information on self-employment tax, see Self-Employed Individual Tax Center.

Self-employment tax does not apply to the sale of personal items reported on Schedule D, Capital Gains and Losses. Read more on Self-Employment taxes here.

Are personal reimbursements and gifts taxable?

No, personal transactions between friends and family and gifts are not taxable and should not be reported on a Form 1099-K. Taxpayers can minimize the chance of errors by asking friends or family members to correctly designate personal transactions. The taxpayer should also make a note of the payment’s purpose and the sender.

What should I do?

Where should I report this income?

You should report the income from Form 1099-K payments on Form 1040, U.S. Individual Income Tax Return, Schedule 1, Additional Income and Adjustments to Income, Schedule C, D, E, or F, depending on the nature of the income.

How should I report the sale of personal property reported on a Form 1099-K?

The gain or loss from personal property is generally the difference between the amount for which you purchased the item and the sales price. A gain on the sale of personal property is taxable and will be reported on Form 8949, Sales and Other Dispositions of Capital Assets, and Form 1040, U.S. Individual Income Tax Return, Schedule D, Capital Gains and Losses.

A loss is not deductible, but it still needs to be reported on Form 1040, U.S. Individual Income Tax Return, Schedule 1, Additional Income and Adjustments to Income. For details, see Form 1099-K Frequently Asked Questions: General | Internal Revenue Service (irs.gov) and go to the topic, Is the gain or loss on the sale of a personal item used to compute my taxable income? (Updated March 22, 2023.)

What should I do if the Form 1099-K is incorrect?

You may have received a Form 1099-K in error for personal transactions, e.g., for transactions between friends and family or expense sharing.

If you receive a Form 1099-K in error or if the information on the form is wrong, contact the issuer of the Form 1099-K immediately. The issuer’s name appears in the upper left corner on the form along with its phone number. Taxpayers should keep a copy of all correspondence with the issuer for their records.

For more information, see Actions to take if a Form 1099-K is received in error or with incorrect information.

What if I can’t get a corrected Form 1099-K?

If you can’t get a corrected Form 1099-K, report the information on Schedule 1 (Form 1040), Additional Income and Adjustments to Income. For details, see Actions to take if a Form 1099-K is received in error or with incorrect information | Internal Revenue Service (irs.gov).

How will this affect me?

If you receive a Form 1099-K as a business owner, from self-employment, from activities in the gig economy, or from the sale of personal property, do not ignore it. If the Form 1099-K is correct, report any income on your tax return. If the Form 1099-K is not correct, get a corrected Form 1099-K.

If you don’t report the taxable amount of the Form 1099-K payments, the IRS may send you a notice proposing to assess additional tax and may audit your tax return. In addition, the IRS may assess additional tax, penalties, and interest.

Keep good books and records to keep track of your income, deductible expenses, and basis of property. Keeping clear records of income, expenses, employees, tax documents, and accounts can bring you peace of mind, help you monitor progress toward goals, and save you time and money when it’s time to file your tax return.

Individuals should also keep good records to determine the nature of transactions reported on the Form 1099-K.

When receiving a payment from a TPSO, you should verify the payor has designated the payment correctly as “Goods and Services” or “Friends and Family” at the time of payment to ensure proper reporting. The TPSO must report any payment designated as Goods and Services on the Form 1099-K if the combined total exceeds $600.

Wait, I still need help.

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you. Visit www.TaxpayerAdvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134, Low Income Taxpayer Clinic List.

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