If you sell goods or services and get paid through a payment app, online marketplace, or credit card processor, you may receive Form 1099-K. The form tells you and the IRS the gross amount of payments you received through that platform. Receiving one does not automatically mean you owe tax, and not receiving one does not mean your income is tax-free. This guide explains what the form reports, when platforms must send it, and how to handle it correctly on your return.
What Form 1099-K is
Form 1099-K, Payment Card and Third Party Network Transactions, is an information return filed by payment settlement entities. There are two broad types:
- Merchant acquiring entities, which process payment card transactions such as credit and debit cards for businesses
- Third party settlement organizations (TPSOs), such as payment apps and online marketplaces that settle payments between buyers and sellers
The form reports the gross amount of reportable payment transactions for the calendar year, broken out by month. Gross means before fees, refunds, shipping costs, or the cost of the item sold.
Current reporting thresholds
The rules have changed several times, which has caused confusion.
- Payment card transactions: There is no minimum threshold. A business that accepts credit or debit card payments through a merchant processor can receive a 1099-K for any amount.
- Third party network transactions: The One, Big, Beautiful Bill, enacted in July 2025, retroactively reinstated the threshold that applied before the American Rescue Plan Act of 2021. A TPSO is required to file Form 1099-K only if gross payments to a payee exceed $20,000 and the number of transactions exceeds 200 in a calendar year. The IRS confirmed this in Fact Sheet 2025-08.
The lower thresholds that had been scheduled under the 2021 law, including $600, no longer apply. Some platforms may still issue forms below the federal threshold, and some states have their own lower reporting thresholds, so you may receive a form even if your activity falls below $20,000.
Your income is taxable whether or not you get a form
This point is essential. Income from a business, side hustle, or gig work is taxable regardless of whether a 1099-K or any other form is issued. The reporting threshold controls only when the platform must file a form, not whether the income is taxable. Keep your own records of sales, fees, and expenses throughout the year.
Payments that should not be on a 1099-K
Form 1099-K is meant for payments for goods and services. It should not include:
- Money sent by friends or family as gifts
- Reimbursements between friends, such as splitting a dinner bill or rent
- Repayment of personal loans
On many payment apps, you can label payments as personal or as goods and services. Ask friends and family to use the personal option for non-business transfers, and keep business and personal transactions in separate accounts if you can.
How to report Form 1099-K amounts
How you report depends on what the payments were for.
Business or side-hustle income
If you sold goods or services as a business, report the gross receipts on Schedule C, Profit or Loss From Business. Then deduct ordinary and necessary business expenses, such as:
- Cost of goods sold
- Platform and payment processing fees
- Shipping and packaging
- Supplies, equipment, and software
- Advertising
Net earnings from self-employment of $400 or more are generally subject to self-employment tax for Social Security and Medicare, reported on Schedule SE.
Selling personal items at a loss
If you sold personal items, such as used furniture or clothing, for less than you paid, you have a loss that is not deductible, but you also have no taxable gain. The IRS has explained how to report this so the 1099-K amount is accounted for. In general, the form amount is reported on Form 8949 and Schedule D with an offsetting basis adjustment, or using the method described in current IRS instructions for personal items sold at a loss. Follow the instructions for the tax year you are filing.
Selling personal items at a gain
If you sold a personal item for more than you paid, such as collectibles or tickets, the gain is a capital gain, reported on Form 8949 and Schedule D. Gains on collectibles can be taxed at higher rates than other long-term gains.
Hobby income
If an activity is not engaged in for profit, it may be a hobby. Hobby income is reported as other income, and hobby expenses are not deductible under current law.
An example
Suppose you sell handmade jewelry through an online marketplace. During the year, buyers pay you $24,000 across 450 orders, so the marketplace issues a 1099-K showing $24,000. The platform kept $2,400 in fees, and you spent $6,000 on materials and $1,500 on shipping supplies. On Schedule C, you would report $24,000 in gross receipts and deduct the fees, materials, and shipping, for net profit of $14,100. That net profit is subject to income tax and self-employment tax.
If you had made the same sales across only 150 orders, the platform would not be required to file a 1099-K under the federal threshold, but the $14,100 of profit would still be taxable.
What to do if your 1099-K is wrong
If the form includes personal payments, the wrong taxpayer identification number, or incorrect amounts:
- Contact the filer, whose name and phone number appear on the form, and request a corrected form.
- Keep documentation showing why the amount is wrong.
- If you cannot get a corrected form before filing, report the amounts accurately and keep records explaining the difference. Current IRS instructions describe how to account for amounts reported in error.
Do not simply ignore a 1099-K, because the IRS receives a copy and may send a notice if the amounts do not appear on your return.
Duplicate reporting
Sometimes the same income appears on more than one form, such as a 1099-K and a 1099-NEC. Report the income once, and keep records showing that the forms cover the same payments.
State reporting rules
Some states require platforms to report payments at lower thresholds than the federal rules. If you live in one of these states, you may receive a 1099-K for smaller amounts. State income tax rules also apply to this income, so check your state’s requirements.
Recordkeeping tips
- Download monthly statements from each platform.
- Track fees, refunds, and chargebacks, which reduce your net income but are included in gross amounts.
- Keep receipts for inventory and supplies.
- Separate business and personal accounts.
- Reconcile platform totals with your own records at year end.
Estimated taxes
If you earn significant income through platforms without withholding, you may need to make quarterly estimated tax payments using Form 1040-ES. Underpaying can result in a penalty. A common approach is to set aside a percentage of each payment for taxes.
Related reading: Earned Income Tax Credit: Who Qualifies, How It Is Figured, and How to Claim It Correctly and Home Office Deduction: Who Qualifies and How to Calculate It.
Frequently Asked Questions
What is the 1099-K threshold now?
For payment apps and online marketplaces, a 1099-K is required when payments exceed $20,000 and transactions exceed 200 in a year. There is no threshold for payment card transactions.
Do I have to pay tax on money received through a payment app?
Only if it is income, such as payment for goods or services or a gain on a sale. Gifts and reimbursements between friends are generally not taxable income.
What if I sold personal items at a loss?
The loss is not deductible, but there is no tax on it. Report it according to IRS instructions so the 1099-K amount is accounted for.
Do I need to report income if I did not receive a 1099-K?
Yes. Taxable income must be reported whether or not you receive any information return.
What should I do if my 1099-K is wrong?
Ask the issuer for a corrected form and keep records supporting the correct amounts.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
