Form 1099-K: Definition, uses, and who has a reporting requirement
Editor’s note (as of December 2024): More people using payment apps or online marketplaces will get a Form 1099-K for tax year 2024. That’s because the IRS lowered the threshold from $20,000 to $5,000. Read more in the reporting requirement threshold section below.
Do you make money through an online marketplace (like Etsy or Poshmark), auction sites (like eBay or eBid), drive for a ridesharing service (like Uber or Lyft), or own a business that accepts third-party network transactions via debit or credit cards? If you answered yes to any of these questions, there is a chance you will receive a 1099-K, a form to report certain payments so you can calculate income tax.
What is a 1099-K, Payment Card and Third Party Network Transactions?
You may know that there are several types of 1099 forms. The 1099-K form specifically reports card payments and transactions from online platforms, apps, or payment card processors. Officially, this tax form is called Form 1099-K: Payment Card and Third Party Network Transactions, which may shed some light on who sends these forms and why.
Note: Generally, apps and online sites should not report gifts or reimbursement of personal expenses from family or friends on a 1099-K as these are nontaxable items.
Rely on H&R Block to help you file your Form 1099-K and get your max refund
What is the 1099-K reporting requirement threshold? And what are the latest 1099-K rules?
With the American Rescue Plan Act, Congress changed the tax reporting threshold, determining when third-party networks must issue IRS Form 1099-K. The reportable payment transaction amount was initially reduced to $600, and the transaction quantity requirement was removed.
There have been a few delays to those changes, but we’re here to fill you in on the latest. On November 26, 2024, the IRS issued guidance on the 1099-K reporting thresholds for tax years 2024, 2025, and beyond.
Here are the current reporting thresholds for platforms to provide 1099-K forms, listed by tax year:
- 2023: Over $20,000 in gross payments and over 200 transactions
- 2024: Over $5,000 in payments and one or more transactions
- 2025: Over $2,500 in payments and one or more transactions
- 2026 and after: Over $600 in payments and one or more transactions
The bottom line: If you receive payments for goods and services in 2024 from an app or online platform, keeping your receipts is a good idea.
When are Forms 1099-K issued?
Platforms will send your 1099-K by January 31 each year. The form will cover all transactions made during the previous tax year. Depending on the options available from the platform, you may receive the 1099-K electronically or in the mail.
What is a 1099-K used for? What do I do with it?
If you receive a 1099-K form, it generally includes the gross amount of all the reportable payment transactions from the platform (payment settlement entity) . The platform or app you used will send two copies of your 1099-K information. One is for you, so you can prepare your tax return. The other will go to the IRS as a record of your payment transactions.
Additionally, it’s good to remember that not all 1099-K transactions are alike, and the tax treatment can vary. No matter what triggers your form, H&R Block can help you with the tax preparation for reporting income from your 1099-K.
Do I have to pay taxes on 1099-K?
This will largely depend on your situation. If you received Form 1099-K for items you’ve sold (like a vintage record or grandpa’s antique watch), goods related to your hobby, or goods or services related to your business, there’s a bit more math and review involved. If you have a business, you may need to include the Form 1099-K amount in your gross receipts. Generally, if you’ve made a profit, it’s possible you’ll owe taxes.
How do I report 1099-K income on my tax return?
How you report the income will depend on why you received it. Here are the 1099-K instructions for a couple of common scenarios.
- Hobby income: You’ll report your gross hobby income on Schedule 1 (Form 1040) as other income. (Learn more about hobby income.)
- Business income: If you’re a sole proprietor, like an independent contractor, you’ll report the income on Schedule C (Form 1040), line 1, and any returns or allowances on Schedule C, line 2. Additionally, you should 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.
Rely on H&R Block to help you file your Form 1099-K and get your max refund
1099-K vs. 1099-NEC vs. 1099-MISC: What are the differences?
The different types of 1099 forms can get confusing, and for good reason: There used to be some overlap between the information reported on these forms, but the IRS has more clearly defined their uses in recent years. Let’s break it down.
- 1099-K (Payment Card and Third Party Network Transactions): Reports card payments and transactions from online platforms, apps, or payment card processors, such as Etsy, eBay, Poshmark, PayPal, or Venmo.
- 1099-NEC (Nonemployee Compensation): Reports fees, commissions, or any other compensation paid by a business to an individual who is not an employee. If you’re an independent contractor or self-employed and receive at least $600 from a business during the year, you may receive a 1099-NEC from the business that paid you. Freelancers, gig workers (rideshare drivers, food deliverers, etc.), and independent service providers are common types of 1099-NEC workers.
- 1099-MISC (Miscellaneous Information): Reports miscellaneous items of income, including rent payments from businesses, royalties, prizes and awards, and medical and healthcare payments. Prior to tax year 2020, Box 7 of Form 1099-MISC was used to report nonemployee compensation paid to you by a business. Now, you should receive Form 1099-NEC for this purpose.
In some cases, you may receive multiple 1099 forms for the same income. For example, if you’re a freelance writer who takes payment through PayPal or Venmo, you may receive a 1099-K from the platform and a 1099-NEC from the business that paid you. You only need to report the income once, so be sure to keep meticulous records that help you match your income to the forms businesses send you.
How to report an error or correct info on your 1099-K
Errors on a 1099-K form can happen for several reasons, and it’s important to get them corrected because the IRS also receives a copy. Common mistakes include incorrect income amount, wrong taxpayer information, personal transactions misclassified as business income, and receiving a 1099-K in error. So, how can you fix it?
- Review the form. Compare it with your payment records (bank statements, app transactions, invoices, etc.) to confirm the error.
- Contact the issuer. The payment processor or online platform that sent the 1099-K (e.g., PayPal, Venmo, Square) is responsible for corrections. Call or email them and explain the mistake.
- Request a corrected 1099-K. If the error is confirmed, ask the issuer to send you and the IRS a corrected version.
- Report discrepancies on your tax return. If the form isn’t corrected in time, you may need to report the incorrect 1099-K income but adjust it properly on your return. A tax professional can help with this.
- Notify the IRS if necessary. If the issuer refuses to fix the mistake, you can call the IRS for guidance. The key is to act quickly to avoid tax complications.
Get help with Form 1099-K
When it’s time to report the tax information on your Form 1099-K, you won’t have to do it alone. No matter what triggered your Form 1099-K, you can count on H&R Block to help you navigate any income you received, including your self-employed taxes.
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Form 1099-K FAQs
FAQs for online marketplace sellers (like Etsy, Poshmark, eBay, or Mercari)
How much do you have to make to receive an Etsy 1099-K or Poshmark 1099-K?
You will receive a 1099-K from online marketplaces like Etsy or Poshmark if you have one or more transactions and meet the reporting thresholds for that tax year (for tax years after 2023). For 2024, the threshold is $5,000 in payments; for 2025, it’s $2,500; and for 2026 and after, it’s $600.
When will I be sent my 1099-K form?
Online marketplaces such as Etsy and Poshmark are required to send 1099-K forms by January 31 each year.
What if I have multiple Etsy shops? Or multiple Poshmark closets?
Your 1099-K reflects the total income earned through each online marketplace during the tax year. If you run multiple Etsy shops, you should still receive only one 1099-K from Etsy. The same is true for multiple Poshmark closets.
What if I sell on Poshmark or Etsy just occasionally, not as a side business?
If you sell used personal items like clothing or furniture for less than you originally paid, these sales typically aren’t taxable, even if you receive a 1099-K. However, if you’re making, flipping, or reselling items and earning money, it may be considered hobby income, which is taxable. It’s important to remember that you’re responsible for reporting all taxable income regardless of whether you receive a 1099-K.
Will I get an eBay or Mercari 1099-K for each account if I have multiple?
If you have multiple auction site sellers and online marketplaces accounts like on eBay or Mercari associated with the same Tax ID, these sites will use your total income across all your accounts to determine whether you meet the reporting threshold for a given tax year. So, if the combined income from all your eBay accounts exceeds that tax year’s threshold, eBay should send you a 1099-K.
Can I deduct any expenses related to my eBay or Mercari sales?
You can deduct expenses related to online marketplace sales, including those from eBay, Mercari, Poshmark, or Etsy, only if the income is considered business income. You cannot deduct expenses related to hobby sales or virtual garage sales. If you sell regularly with the intent of making a profit, the IRS will likely consider your operation a business (even if it’s just a side gig). In that case, you can deduct expenses (materials, shipping, fees, etc.) on Schedule C (Profit or Loss from Business).
FAQs for rideshare drivers (like Uber or Lyft)
How do I report my income from Uber or Lyft?
As an Uber or Lyft driver, your income may be reported via two different 1099 forms. You’ll receive a 1099-K if your total fares paid via credit card or third-party processors exceeds the reporting thresholds for that tax year. You may also receive a 1099-NEC if you earn at least $600 in non-driving income such as promotions, bonuses, or referral payments. Even if you don’t receive a 1099-K or 1099-NEC, you’re still required to report all earnings to the IRS on Schedule C (Profit or Loss from Business).
Why did I receive more than one 1099-K?
You may receive 1099-Ks from multiple ridesharing services if you drive for more than one platform (e.g., both Uber and Lyft). You could receive multiple 1099-K forms from the same company if it splits payments between different third-party processors, though this is rare. Additionally, if you complete trips in multiple states, you could receive a 1099-K for each state.
What are the Uber Tax Summary and the Lyft Annual Summary?
The Uber Tax Summary and Lyft Annual Summary are documents that the companies provide to rideshare drivers to help you understand what your taxes may be for the year. These summary documents include a breakdown of annual rideshare earnings, expenses that may be tax deductible, and a record of your rides and online miles for the year. These summaries are delivered to every driver regardless of whether you meet the reporting threshold to receive a Form 1099.
Why did Uber or Lyft send me a 1099-NEC?
Rideshare companies will send you a 1099-NEC if you earned at least $600 in non-driving income like promotions, bonuses, or referral payments.
Why doesn’t my Uber or Lyft 1099-K total match my direct deposit amount?
Form 1099-K reports gross income, meaning the total amount passengers paid before any deductions. The amount you see in your bank account is your net income after rideshare platform service and booking fees, commissions, and other costs.
You might be thinking, “Does this mean I get taxed on money I never received?” Not exactly! Although your 1099-K reports gross earnings, you can deduct expenses (including fees, commissions, and mileage) on Schedule C. The IRS only taxes net profit, not the full 1099-K amount.
What mileage can I claim as a business expense for my Uber or Lyft driving?
You can claim mileage for driving to pick up a passenger, driving with a passenger, driving between rides, or trips for business-related errands (going to the gas station, car washes, or maintenance stops specifically for rideshare work). You can’t claim mileage for driving before turning on the rideshare app, driving home after logging off, or personal errands.
Your Uber Tax Summary or Lyft Annual Summary should provide your total online mileage for the year, but it’s best to keep careful records as a backup. Learn more about mileage tax deductions, including IRS mileage rates.
FAQs for businesses that use third-party network transaction platforms (like Venmo or PayPal)
Are payments or reimbursements from friends and family included on a PayPal or Venmo 1099-K?
No, personal payments and reimbursements from friends and family are not taxable, so they are not included on a PayPal or Venmo 1099-K if they are correctly categorized. Form 1099-K only reports transactions for goods and services, not personal transfers to split bills, send gifts, or reimburse friends. However, if someone accidentally sends you a personal payment under the “goods and services” category, the platform may include it in your 1099-K. To fix this, contact the payment platform to request a correction and keep records showing the payment was not business-related, just in case the IRS asks.
What if you lost money through a PayPal or Venmo transaction?
You may be able to offset or report the loss, depending on the situation. If you received a 1099-K for a business transaction you later refunded, the platform may not adjust your reported income automatically. Keep records showing the refund, and report only your actual net income on your tax return. If you sent money as part of a business transaction but never received the product/service, or you sold something for less than what it cost you, you may be able to deduct it as a business loss or expense on Schedule C. (Note: You cannot deduct personal losses like selling a personal item for less than you originally paid—but you won’t owe taxes on them, either.)
What if my 1099-K form is incorrect?
If PayPal or Venmo reported a refunded, disputed, or personal transaction as income on your 1099-K, contact their customer service and request a correction. If the platform won’t correct it, keep documentation showing why the income isn’t taxable and only report what you actually earned. A tax pro can help with this, or you can use an online tax filing service like H&R Block Online to indicate which transactions were personal before you send your tax return to the IRS.
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