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ResourcesAccounting and Taxes

Form 1099-K: A Guide for the Self-Employed

Accounting and TaxesDecember 11, 2023

Filing your taxes as a self-employed person requires you to navigate many different tax forms. In addition to the ones you must file with your annual return, the parties you do business with will often send you some, including Form 1099-K.

Due to recent Internal Revenue Service (IRS) regulation changes, millions of taxpayers will receive 1099-K forms for the first time in 2024. The IRS estimates there will be 44 million 1099-Ks filed in 2024, up from only 14 million in 2023.

If you earn any business income, even with a side hustle, here’s what you should know about 1099-K forms to avoid unpleasant surprises next year. We’ll explore how they work, why they matter for your taxes, and their new qualification requirements.

What is Form 1099-K?

When your activities on a third-party payment processor exceed a certain threshold, the platform must report your gross annual receipts to the IRS on Form 1099-K. You will also receive a copy and should report the amount in Box 1a on your tax return.

Payment processors are platforms that facilitate the electronic transfer of funds, often between buyers and sellers. If you’re self-employed, you probably use at least one of them to get paid for your goods or services.

For example, small business owners often use processors like Paypal, Venmo, and Stripe to take customer payments. Similarly, some gig economy apps facilitate funds transfers in addition to connecting workers with customers, like Uber.

Just to be clear, you never have to fill out Form 1099-K as a taxpayer. Platforms will only send completed copies to you. However, if they do, they’ll also send one to the IRS, so you must claim the reported amount on your return to avoid penalties.

Who Receives a Form 1099-K?

The history of the 1099-K form’s qualification requirements has been full of a lot of delays. Starting with the tax year 2025, you will receive a Form 1099-K from each third-party payment processor on which you had $600 in annual gross receipts.

For example, you’re likely to receive a 1099-K form if you:

  • Generate at least $600 in rent using Airbnb

  • Sell more than $600 worth of products on Etsy

  • Collect $600 or more in fees for writing services through Stripe

The new qualification thresholds have raised a lot of concerns from payment processors, tax professionals, and taxpayers over the logistics of the transition. The new qualification threshold rules were supposed to take effect in 2022, but there was concern and the IRS delayed the implementation of the reduced threshold until 2023. 

In November 2023, the IRS announced another delay, phasing the rollout over the next few years:

  • The 2023 tax year will be another transition year, with the 200 payments and $20,000 threshold remaining in effect.

  • The 2024 tax year will have a $5,000 1099-K reporting threshold, instead of a $600 threshold.

  • Full implementation of the new law will roll out in 2025 tax year

This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

This phased-in approach will allow the agency to review its operational processes to better address taxpayer and stakeholder concerns.

To clarify the timing, collecting $600 in payments on a platform during 2025 will result in you receiving a 1099-K form in early 2026. You’ll need the document to file your 2025 tax return that April. The same is true for future tax years.

For previous tax years, including 2022, you must have collected over $20,000 in gross receipts and completed more than 200 transactions on a payment processor to get a Form 1099-K.

If you’re one of the many getting a 1099-K for the first time, don’t worry. It shouldn’t change too much for you if you are reporting all your earnings already. However, it’ll make it much harder to collect electronic payments under the table.

How to Access Your Form 1099-K

The IRS requires that 1099-Ks be sent to the payee by January 31 after each tax year. Failure means being subject to penalties, so expect your copy by then.

Most modern payment processors default to providing you with an electronic copy of your Form 1099-K. You generally won’t receive an emailed copy, but you’ll probably get an email notifying you that it’s available for download. 

You’ll then be able to access the form through your account on the platform’s website or mobile app. You can often ask for a paper copy instead, but there’s no real reason to. It usually just means having to wait longer.

If you don’t receive a 1099-K from a payment processor when you expected to, double-check that you meet the right qualifications for the tax year. If you’re still confident you’re supposed to get one, you’ll want to reach out to the platform.

Just be sure to report your income accurately on your tax return whether you get a 1099-K form or not. As long as you do that, you typically don’t need to worry about paying any penalties. The IRS will generally only come down on the platform that was supposed to send it.

How to Report 1099-K Income on Your Taxes

Reporting your 1099-K income on your taxes isn’t always as simple as copying the number displayed onto your return. Here are some steps you should follow to make sure you’re claiming the right amount.

Verify Box 1a

Whenever you get a 1099-K form, always double-check that it matches your expectations. Payment processors may include non-taxable receipts in the amount, such as transfers from friends or proceeds from the sale of personal items at a loss.

You’ll find your total receipts for the year in Box 1a. Remember that it equals your payments before accounting for platform fees. Similarly, it's before adjustments for things like refunds, credits, or discounts that you may have provided your customers.

As a result, you won’t be able to tie the number directly to the sum of the deposits you received. Some extra work will be necessary to reconcile the 1099-K amount to what hit your business bank account.

Fortunately, most payment processing platforms also provide unofficial documentation to help explain the difference between the two, including details like total fees charged. Use it along with your own bookkeeping records to confirm your 1099-K is accurate.

Correct Any Mistakes

If you discover that your 1099-K form isn’t correct, it’s best to contact the platform immediately and ask them to fix the mistake. You don’t want to claim a different amount on your return and have the IRS flag the discrepancy.

Even if the number you reported is the right one, that can be a hassle. Your return won’t be rejected, but any refund you’re due could be delayed. You’ll have to wait for the IRS to mail you a letter before you can even address the issue, and the IRS is still experiencing significant delays.

Report Amount on the Proper Tax Forms

Once you confirm that the number displayed on the latest copy of your 1099-K form is correct, you should generally report the amount on Schedule C, Form 1040.

That assumes your gross receipts were business income from the sale of goods or services, which is the most common scenario for self-employed people. It also assumes that you’re a sole proprietor, the default tax filing status for independent contractors.

If you own a different legal entity or received your 1099-K for collecting proceeds from the sale of a personal item, you’ll need to use different tax forms. Which ones depends on your circumstances, so consider asking a tax professional for guidance.

Get Help With Your Business Taxes

Self-employed people generally face more complicated tax situations than 9-to-5 employees. While that can be frustrating, the added complexity also means having more opportunities to save money with the right strategies.

Fortunately, you don’t need to figure everything out yourself. Instead, consider hiring a tax expert, such as a Certified Public Accountant. They’ll be able to minimize the taxes you owe while complying with tax laws, and any fees you pay them are tax deductible.

Another great way to make managing your taxes easier is to use Found! It’s a business checking account built from the ground up with the self-employed in mind. As a result, it has features designed to streamline your tax responsibilities.

For example, Found can automatically track your income and categorize your expenses. If you receive a 1099-K form, you’ll be able to reconcile the amount to your records with ease. That way, you won’t have to scramble when tax time comes around. 

Sign up for Found today and try out its tax management features for free!

Frequently Asked Questions about 1099-K Form

What is a 1099-K Form Used For?

A 1099-K form is used for reporting payments made to individual taxpayers through third-party payment processors. At the end of each tax year, the platform files the document with the IRS and sends a copy to the taxpayer.

Taxpayers don’t have to fill out 1099-K forms themselves. Instead, they’re responsible for using the information in them to file their taxes. More specifically, they should generally include the amount found in Box 1a in their gross income.

What is the Difference Between 1099-K and 1099-NEC?

Form 1099-K and Form 1099-NEC are both informational tax documents you may receive as a taxpayer. However, they have subtly different purposes, qualification requirements, and issuers.

Form 1099-K reports significant amounts of money transferred through third-party payment processors. You’ll get one from each platform you use to collect more than $600 in gross receipts per year.

Form 1099-NEC reports non-employee compensation paid to independent contractors, freelancers, and other self-employed people. You’ll get one from each client or customer that pays you more than $600 per year, regardless of the payment method they use.

What Does a 1099-K Look Like?

A 1099-K is an official tax document created by the IRS. On its left side, it shows identifying information about the issuing payment processor and the recipient, including their names, addresses, and taxpayer identification numbers.

On the right side, it includes details about gross payments to the recipient through the platform before fees and other adjustments. Generally, the most important part is Box 1a, which displays the total amount the recipient collected for the year.

Do I Have to Report 1099-K Income?

You must report 1099-K income on your tax return if it’s money you earned by selling goods or services. Assuming you’re a sole proprietor, it’s generally subject to ordinary income and self-employment taxes. Report the amount on Schedule C.

Remember, when a payment processor sends you a 1099-K form, they must also send a copy to the IRS. As a result, the agency will know if you fail to claim your 1099-K income on your return.

Why Is Zelle Exempt From 1099-K?

Third-party payment processors are generally required to send 1099-K forms to users who collect more than $600 in gross receipts during a tax year. However, Zelle is exempt because it never actually holds your funds.

With sites like PayPal and Venmo, money you collect is stored on the platform at first. You must initiate a separate transfer to send them to your bank account. That intermediary step doesn’t occur with Zelle, so it’s exempt from issuing 1099-K forms.

However, collecting payment for goods or services on Zelle doesn’t mean you're exempt from reporting the income on your tax return. The IRS can still discover that you’ve underreported, in which case they can penalize you or even pursue you for tax evasion.

Disclaimer: The information on this website is not intended to provide, and should not be relied on, for tax advice.

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