What is a 1099-K form? Who gets one and how to report income for taxes

As a small business owner, you're likely familiar with the mountain of tax paperwork that comes with the territory, from issuing W-2 Forms to your employees or gathering your income and expenses for your tax return. One other form you might encounter is Form 1099-K, which reports certain payment transactions.

For the 2026 tax filing season, the IRS has significantly changed the rules around Form 1099-K. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, retroactively reinstated the previous federal threshold: $20,000 in gross payments and more than 200 transactions.

You likely won't receive a 1099-K in the upcoming filing season unless you meet both of those requirements. However, since each payment processor tracks this independently, your reporting responsibilities can still feel like a moving target.

Let's explore what Form 1099-K is, why you're receiving it (if you get one), and what you need to do.

Jump to:

• What is a 1099-K form used for?
• Who gets a 1099-K form?
• Who should not get a 1099-K?
• Is my 1099-K income taxable?
• Steps for reporting 1099-K income
• Troubleshooting your Form 1099-K
• Find peace of mind come tax time

What is a 1099-K form used for?

The 1099-K is an IRS tax form for reporting payment card and third-party network transactions for independent contractors, freelancers, and small businesses.

The IRS uses Form 1099-K to track digital payments through payment cards and third-party payment processors. It helps the IRS validate that all businesses are reporting the correct sales so the government can tax them correctly.

The form reports the business income your company collected using payment card transactions and third-party network transactions. The IRS requires all freelancers, retailers, independent contractors, and other businesses that receive one or more 1099-K forms to report them on their income tax returns.

Form 1099-K will come from the company, not the IRS, and each company is responsible for sending one (hence, you may get more than one).

Who gets a 1099-K form?

​​If you're a small business owner or freelancer who accepts payments online or card payments in person, you might receive a 1099-K form. Payment settlement entities and third-party networks use this form to report your business's credit card and digital transactions to the IRS.

For the 2026 filing season (reporting 2025 income), the requirements for receiving a 1099-K depend on how you were paid:

Third-party payment networks

Following the passage of OBBBA in 2025, the federal reporting threshold for third-party settlement organizations (TPSOs) has officially reverted to its original levels.

You will typically only receive a 1099-K from platforms like PayPal, Venmo, Stripe, Square, Etsy, or eBay if you meet both of these criteria:

• Gross payments exceed $20,000
• More than 200 transactions

Credit, debit, and gift card transactions

If you accept credit, debit, or gift card payments, you will receive a 1099-K regardless of the amounts. There is no minimum federal threshold for these types of transactions.

3. State-level exceptions

While the federal transaction threshold has reverted, this doesn't automatically apply to the state level.

Many states (including Maryland, Massachusetts, Vermont, and Virginia) have kept their own reporting thresholds as low as $600.

So you may still receive a 1099-K for state tax purposes even if you don't receive one from the IRS.

Who should not get a 1099-K?

While the federal government has significantly increased the reporting requirements for the 2026 filing season, there are still many situations where you should not receive a Form 1099-K. Remember, this form is intended for business-related income only.

**Here are some examples of when you should *not* get a 1099-K:**

• Reimbursement from friends or family: If a friend sends you money to cover their portion of a dinner bill, or your roommate pays you back for rent, this is not business income and should not be reported on a 1099-K.
• Gifts: Money received as a gift from friends or family is not taxable and should not be included on a 1099-K.
• Personal sales under the new federal threshold: For the 2025 tax year, the federal threshold has reverted to $20,000 and more than 200 transactions. If you sold a used couch or old clothes online and stayed below these limits, a federal 1099-K should not be issued. Remember to check your state laws for any additional reporting requirements.
• Repaying a personal loan: If someone sends you money to repay a personal loan, this is not considered income and should not trigger a 1099-K.

If you use a card reader or third-party payment app for both business and personal transactions, it's crucial to keep them separate. Otherwise, you might receive a 1099-K that includes personal payments, which could complicate your tax filing. Consider using a separate account for business transactions to avoid this issue.

Is my 1099-K income taxable?

Receiving a Form 1099-K doesn't automatically mean that all the reported income is taxable. Whether you owe taxes depends on the *nature* of the transactions.

Here's a breakdown:

• Business income: If the payments reported on your 1099-K are for goods or services sold as part of your business, this is generally considered taxable income. You'll report this income on your tax return (usually Schedule C) and pay taxes accordingly.
• Personal sales: If you sold personal items online and received a 1099-K, the taxability depends on whether you made a profit. The profit is generally taxable if you sold an item for more than you originally paid for it. However, selling an item for less than you originally paid is generally not taxable.
• Nontaxable income: As we mentioned earlier, reimbursements, gifts, and personal loan repayments are not taxable, and you shouldn’t include them in your taxable income calculations.

Now, let's explore how you can potentially reduce your tax liability on this income.

Deductions for business expenses

If your 1099-K reports business income, you can typically deduct related business expenses to reduce your taxable income. These might include:

• Transaction fees: These are the fees charged by payment processors like PayPal or Stripe or by credit card companies for processing transactions. These fees can add up, so deducting them can make a significant difference.
• Online marketplace fees: If you sell on platforms like Etsy or eBay, you can deduct the fees they charge for listing your products, processing sales, and other services.
• Shipping costs: If you ship goods to customers, you can deduct shipping costs, including postage, packaging materials, and insurance.
• Advertising and marketing: Expenses related to promoting your business, such as online advertising, print ads, or social media marketing, are often deductible.
• Home office expenses: If you have a dedicated space in your home used exclusively for your business, you may be able to deduct a portion of your rent or mortgage, utilities, and other home-related expenses.
• Supplies and materials: The costs of materials used to create your products or provide your services are generally deductible.
• Professional fees: Fees paid to professionals like accountants, lawyers, or consultants for business-related services are often deductible.

Steps for reporting 1099-K income

If you're wondering, "Do I have to report 1099-K income?", the answer is *yes.*

Reporting and filing Form 1099-K on your tax returns still works the same. It’s very similar to other tax forms you’ll run into as a business owner. You’ll need certain information from this form to complete your overall tax return.

Below are the four steps for reporting 1099-K income.

Step 1: Know who’ll send you 1099-K forms

If you’re like many small business owners, you likely use several forms of payment, from credit cards to Apple Pay and others. It’s your responsibility to keep track of your transactions throughout the year. Using accounting software that links to your bank account can help streamline this task.

Step 2: Confirm each 1099-K form has the correct information

Closely examine your 1099-K form and ensure that the amounts and information on them are correct. This means checking:

• Your name
• Business name
• Address
• Account number
• Taxpayer identification number
• Gross amount of payments

Failing to be thorough can lead to paying incorrect taxes. For example, if you don't report your gross payment amount and transfer this incorrectly onto your tax return, you’ll likely pay the incorrect amount of taxes.

Here is an example of what a completed 1099-K might look like:

Step 3. Check for tax deductions

Businesses that incur credit card processing fees or credit card company charges are eligible for a tax deduction for those expenses. However, it is up to you to track your expenses, charges, and fees during the year so you can write them off.

Step 4: Prepare your Schedule C

Schedule C (Form 1040) is an IRS form that shows the income or loss your business incurred during the year. Since a 1099-K form reports payments you received via a third-party payment platform or app, you'll include that information on your Schedule C form as part of your tax return.

Once you’ve checked that your 1099-K form shows the correct amounts and information, the next part is to fill in the 1099-K gross payment amounts and fees into your Schedule C form.

Troubleshooting your Form 1099-K

Receiving an unexpected or incorrect tax form can be stressful, but understanding how to reconcile these documents is key to acing tax season. Here are some of the most common 1099-K issues and what to do about them.

How much in taxes do you pay on a Form 1099-K?

The amount of tax you owe on your 1099-K income depends on several factors, such as your overall income, deductions, and tax bracket. You'll generally need to pay federal income tax on any business income reported on the form.

As a self-employed individual, you'll also owe self-employment tax, which covers FICA taxes for Social Security and Medicare, at a rate of 15.3% of your net earnings.

Remember that you can deduct eligible business expenses to reduce your taxable income, and it's crucial to make estimated tax payments throughout the year if you anticipate owing a significant amount in taxes.

Are personal payments included on Form 1099-K?

A 1099-K form is specifically for reporting payments you've received via third-party networks for goods or services. That doesn't include personal payments from a friend or family member or any money unrelated to business that you may receive.

You can avoid mixing accounts by creating a separate business bank account for your company and differentiating between the money that your friends and clients send you.

How can I correct information on a 1099-K form?

Contact the payment settlement entity (aka credit card company or third-party payment processor) that’s listed on your Form 1099-K if you find an error.

Some common errors include:

• Misspelled names
• Incorrect taxpayer-identification numbers
• The form isn’t yours at all
• The form is a duplicate

If you received a 1099-K form for the sale of a personal item or items, you sold. Contact a tax expert to have your taxes prepared to report the 1099-K on your tax return correctly.

What happens if you don't file your 1099-K on your taxes?

Information return forms (such as Forms 1099) that you fail to include on your tax return could lead to inaccurate reporting of income and be subject to IRS penalties and interest.

Find peace of mind come tax time

Whether this is your first go-round with a Form 1099-K or your tenth, there are things you can do to ensure you’re ready for tax season. This includes leveraging experienced bookkeepers to assess your accounting books and help with all your 1099 forms.

With live bookkeeping services like QuickBooks Live, you can also ask questions about income tax returns, refunds, and tax forms like Form 1099-MISC and Form 1099-K.