Form 1099-K
What You Need to Know
If you've received payments through third-party platforms like PayPal, Venmo, or credit card processors, you might receive a Form 1099-K. This form reports payment card and third-party network transactions to both you and the IRS. Understanding its purpose and how to handle it is crucial for accurate tax reporting.
Who Receives Form 1099-K?
You may receive a Form 1099-K if:
Payment Thresholds: For tax years before 2024, if you received over $20,000 in gross payments and conducted more than 200 transactions through a third-party network, you'll receive this form. Starting in 2024, the threshold was set to decrease to $600, regardless of the number of transactions; however, IRS has indicated they plan to implement a $5,000 threshold for 2024. (Some states may have lower thresholds.),
Payment Types: Payments received for goods and services are reported. Personal transactions, such as gifts or reimbursements from friends and family, are generally excluded. However, proper reporting will rely in part on the payee correctly classifying the nature of the payment, so we expect some forms will be inaccurate.
Why Is Form 1099-K Important?
The IRS uses Form 1099-K to track income from electronic transactions, ensuring all taxable income is reported. Even if you don't receive a Form 1099-K, you're still responsible for reporting all income on your tax return.
What to Do If You Receive Form 1099-K
Verify the Information: Ensure the amounts reported match your records. If there's a discrepancy, contact the payment processor for clarification or correction.
Report All Income: Include the income reported on Form 1099-K on your tax return, along with any other income sources.
Maintain Detailed Records: Keep thorough records of all transactions, including invoices, receipts, and bank statements, to substantiate your income and expenses.
Common Questions
What if I didn't receive a Form 1099-K? You're still required to report all taxable income, even if you don't receive the form.
What if the form includes personal transactions? If personal transactions are mistakenly included, we will still need to report the form on your return to avoid an IRS notice, but we can “back out” the personal payments on the return so that they are not taxed.
How does this affect my taxes? All payments reported on a 1099-K will need to be reconciled on your tax return, even any non-taxable portions. Income received for providing goods or services is always included in gross income, regardless of whether pr not it is reported on a 1099.