Are you a business owner who accepts credit, debit, or gift card payments, or do you receive payments through a payment app or online marketplace? If so, you may have received a Form 1099-K from your payment issuer. But what is a 1099-K form, and what does it mean for your business?
Don’t worry, we’ve got you covered. In this article, we’ll break down what a 1099-K form is, who gets one, and how to report payments on your tax return. We’ll also cover important topics like payment thresholds, deadlines, and tax deductions.
Key Takeaways
Form 1099-K is an IRS information return that reports payments you received from payment card processors, payment apps, and online marketplaces for the sale of goods or services.
For the 2024 tax year, a 1099-K form must be sent if the payments you receive from a payment app or online marketplace exceeds $5,000, or if you receive any amount as payments from a payment card processor.
You should receive any 1099-K forms for a tax year by January 31 of the following year (for example, forms for the 2024 tax year are due by January 31, 2025).
The total amount of payments you receive from a payer are reported on Form 1099-K, but you typically only have to pay tax on any profits from the related sales of goods or services.
What is a 1099-K Form?
A Form 1099-K, also known as a Payment Card and Third-Party Network Transactions form, is an IRS information return that reports payments you received from payment card processors, payment apps, and online marketplaces for the sale of goods or services.
Who Gets a 1099-K Form?
You should get a 1099-K form if you received payments for the sale of goods or services during the tax year from any of the following:
Credit, debit, gift, or other payment card processors (like MasterCard, Visa, a bank, or retailers providing gift cards)
Payment apps (like PayPal or Venmo)
Online marketplaces (like eBay or Etsy)
For the 2024 tax year, a payment app or online marketplace is only required to report payments exceeding $5,000 for the year – although they can send you a 1099-K form if you’re paid a lesser amount.
How to Report 1099-K Payments on Your Tax Return
If you’re self-employed, have a side gig, or are otherwise operating a business taxed as a sole proprietorship, report your income – including payments reported on 1099-K forms – on Schedule C of your individual income tax return. That’s where it will be combined with other business income, and expenses will be deducted, to determine your business profit or loss.
If your business is taxed as a pass-through entity – such as an S corporation or partnership – any 1099-K payments are reported on Form 1120-S or Form 1065. Your proportional share of the business’s profit or loss will ultimately be reported on your personal income tax return (Form 1040).
How to Correct Information on a 1099-K Form
What if you receive a Form 1099-K that doesn’t belong to you or includes an incorrect gross payment amount?
Your first move should be to check your own records against the information reported on the 1099-K form. If the information on the 1099-K doesn’t match your records, contact the person or business that issued the form and ask for a corrected form (their telephone number should be on the form).
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