By alphacardprocess September 23, 2025
The IRS increased the 1099-K reporting thresholds, impacting companies and payment processors. Lower thresholds result in more transactions being reported, so it’s important that companies monitor payments, keep accurate records, and comply. Timing these changes now avoids errors, penalties, and ensures smooth tax reporting in future years.
What is Form 1099-K?
Form 1099-K is an IRS tax form that they use to monitor payments you made through payment apps, online marketplaces, or card processing. It’s intended to record cash coming in through electronic payments such as credit cards, debit cards, or third-party payment systems.
If you’re a business owner and receive payments other than cash or checks, you’ll probably receive a 1099-K. Information in this document is helpful to use when preparing your tax return because it indicates the amount of income you received via electronic or card-based payments over the year.
What is a 1099 Form Used for?
A 1099 form is basically a way for the IRS to keep track of income that isn’t from a regular paycheck. It’s an “information return” that reports certain financial transactions, like payments made to individuals or businesses. The individual or business that makes the payment (the payer) is typically the one that reports the 1099 to the IRS.
They also send a duplicate to the individual receiving the payment, so that the recipient and the IRS both have a record of how much money was paid. Occasionally, a duplicate also goes to your state tax authority. The idea is straightforward: to ensure all income is reported accurately.
Who Receives a 1099-K?
You’ll typically receive a 1099-K if you were compensated for selling goods or services using credit cards, debit cards, gift cards, payment apps (such as PayPal or Venmo), or online platforms (such as eBay or Ticketmaster).
Marketplaces and apps will have to report a 1099-K if your pay is $20,000 in payments and 200 transactions. However, a few states might make you report even if you made less. In contrast, card payments (credit, debit, or gift cards) have no minimum — you’ll receive a 1099-K regardless of the figure.
If you make money from side jobs (such as driving, babysitting, or food delivery) or selling items you own (such as clothes, furniture, or tickets), those earnings can also prompt a 1099-K. You might even receive more than one form if you have multiple platforms.
But the money you get personally — such as your friend paying you back for dinner or birthday money from your parents — doesn’t qualify. That won’t appear on a 1099-K, since it’s not business or service-related.
1099-K Reporting Thresholds and New Rules
The regulations for when third-party networks have to issue a 1099-K under the American Rescue Plan Act have changed. The threshold to report is lower now, and the quantity of transactions is no longer relevant.
This is what you should know for recent tax years:
- 2023: Payments over $20,000 and over 200 transactions.
- 2024: Payments over $5,000 and 1 or more transactions.
- 2025: The One Big Beautiful Bill Act eliminates the $600 reporting threshold introduced by the American Rescue Plan Act of 2021, bringing the Form 1099-K reporting requirements back to $20,000 in payments and 200 transactions..
- 2026 and beyond: Payments over $600 and 1 or more transactions.
If you receive payments for goods or services online or using apps, it’s a good idea to have all records and receipts ready to keep yourself prepared.
Things to Always Review in Your 1099-K
Ensure that all your information on your Form 1099-K is accurate. Ensure that your name and your taxpayer ID number (TIN) are correct according to your records. The TIN may be the final four digits of your Social Security number, ITIN, ATIN, or EIN. In case you report business income on forms such as 1120, 1120-S, or 1065, and the 1099-K is incorrect, you will need to have it corrected.
Also, check the amount of gross payment in Box 1a, which indicates the total payments made to you via cards or third-party networks. The total amount doesn’t include fees, credits, refunds, shipping, cash equivalents, or discounts. These may be deducted while determining your taxable income.
Verify your own records—such as payment app reports, marketplace statements, or card receipts—to make sure the figures are correct. If something is wrong, call the issuer to fix the form. Good record-keeping ensures that you report the correct income and deductible expenses on your tax return.
How are 1099-K Payments Taxed?
All income usually must be reported on your federal tax return, except when the law specifically excludes it. That includes funds you receive in credit card processors, payment apps, or online marketplaces—even if you don’t actually receive a 1099-K.
The structure normally displays the “gross payment amount,” and that can also have items in it that aren’t taxable, such as refunds, fees, shipping charges, credits, or customer discounts. When you file your return, you can deduct those from the amount.
You only pay taxes on profit, not the whole payment. Let’s say your 1099-K reads $10,000; you only pay taxes on the actual profit of your sales. If you have a business, you can deduct the cost of goods sold. If you’re selling personal things, you can only deduct what you initially paid. Capital gains, the profits from personal sales, are taxed at a reduced rate. Losses on personal items, however, cannot be used to lower your tax
State Wise Threshold
State | Filing Requirement | Threshold |
Arizona | If State Withholding | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Arkansas | CF/SF | Form 1099-K should be reported regardless of the $2,500 filing threshold |
Colorado | If State Withholding | Form 1099-K should be reported regardless of the $5,000 filing threshold |
District of Columbia | Direct State filing | File if threshold is $5,000 |
Georgia | If State Withholding | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Idaho | CF/SF | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Illinois | Direct State filing | $1,000 and 4 transactions |
Indiana | Direct State filing | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Iowa | If State Withholding | Form 1099-K should be reported regardless of the $1,500 filing threshold |
Kansas | If State Withholding | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Kentucky | If State Withholding | Form 1099-K should be reported regardless of the $5,000 filing threshold |
Louisiana | CF/SF | Form 1099-K should be reported regardless of the $1,500 filing threshold |
Maryland | CF/SF | $1,500 |
Massachusetts | Direct State filing | $1,500 |
Minnesota | If State Withholding | Form 1099-K should be reported regardless of the $1,500 filing threshold |
New Jersey | CF/SF | $1,000 and 0 transaction |
Rhode Island | If State Withholding | Form 1099-K should be reported regardless of the $1,500 filing threshold |
South Carolina | If State Withholding | Form 1099-K should be reported regardless of the $1,500 filing threshold |
Utah | Direct State filing | Form 1099-K should be reported regardless of the $1,500 filing threshold |
Vermont | Direct State filing | $1,500 and 0 transaction |
Virginia | Direct State filing | $1,500 and 0 transaction |
Wisconsin | If State Withholding | Form 1099-K should be reported regardless of the $1,500 filing threshold |
Note: Always check the latest updates to ensure you are in sync with the rules.
How Do You Report 1099-K Payments on Your Tax Return?
Whether you report 1099-K payments on your tax return or not depends on the type of sales you’re making. If you’re a freelancer or work on the side, report the income (including any on a 1099-K) on Schedule C on your tax return. That’s where you also keep track of expenses to determine profit or loss, and the end figure then transfers to your Form 1040.
If your business is an S corporation or a partnership, report payments on Form 1120-S (for S corporations) or Form 1065 (for partnerships). Your share of the loss or profit passes through to your own Form 1040. If your business is a C corporation, report payments on Form 1120. The corporation pays the taxes, not you.
If you sold personal effects, report the gain on Form 8949, which is sent to Schedule D, and then on to your Form 1040. In case you incurred a loss, you can’t deduct it, but it also must be reported on either Schedule 1 or on Form 8949 with the proper code. If you incurred both gains and losses, you will have to report them separately.
1099-K vs 1099-NEC vs 1099-MISC
Form | What It Reports | When You Receive It | Examples |
1099- K | Payments from third- party processors, apps, or marketplaces | If you receive over $5,000 in payments through platforms like PayPal, Stripe, or Etsy (2024 rule) | Online sales, payments via apps |
1099-NEC | Non-employee compensation for services | If you earn $600 or more from a client or business | Freelance writing, design, consulting, contract work |
1099-MISC | Miscellaneous income that doesn’t fit into other forms | At least $600 (in most cases) or $10 for royalties | Rent, prizes, legal fees, medical payments, crop insurance proceeds |
1099-K vs. Schedule K-1
Form | What It Reports | Who Sends It | Examples |
1099-K | Payments received for goods or services through payment apps or card processors | Payment platforms (PayPal, Stripe, Etsy, etc.) | Online sales, freelance work paid via apps |
Schedule K-1 | Your share of income, losses, deductions, and credits from a business or trust | Partnerships, S corporations, LLCs, trusts, or estates | Share of partnership profits, S corp distributions, estate income |
What to Do If You Get a 1099-K in Error
At times, you may receive a Form 1099-K when you are not supposed to. This may occur if it reflects personal payments from family or friends, it does not belong to you, or it is a duplicate of one already received.
If this happens, contact the issuer right away. The issuer’s contact info is on the top left of the form under “Filer.” Request a corrected 1099-K showing a zero amount. Keep a copy of the original form and all correspondence. Don’t delay filing your taxes—you can file even without the corrected form.
When the Gross Amount on Form 1099-K Is Shared
Occasionally, the gross payment amount (Box 1a) in Form 1099-K isn’t all yours and might be money paid to other businesses or individuals. Here’s what you need to know and do:
- Shared Credit Card Terminal: If you operate a shared terminal with another company, the 1099-K will show their transactions as well. Report the proper forms for each business and retain records of payments, contracts, and canceled checks.
- Business Bought or Sold: If your business was sold during the year, the 1099-K may reflect payments prior to or after the sale. Ask for a corrected form and retain it with the purchase or sales contract.
- Business Entity Change: If your business structure or tax ID changes, your 1099-K may not reflect your new tax return. Inform your merchant acquirer and retain documentation to substantiate correct income and deductions.
- Cash Back Payments: Customer cash back on debit card transactions is shown on the 1099-K but is not taxable. Keep a record of all cash back provided.
- Multiple Sources of Business Income: When you accept payment for various businesses on the same terminal, the 1099-K will report all amounts. Use your records to report each business’s income on the appropriate return or schedule.
Implications of These Changes & Next Steps
The new 1099-K regulations introduce many key changes for payment platforms and companies that use them. With reporting thresholds declining in the coming years, platforms will have to modify systems to keep an accurate track of payments and report on time, lessening the potential for errors and fines.
Backup withholding can even apply to smaller payments, so accurate tracking and reporting are critical to keep up compliance and trust. Customers unfamiliar with the changes may have questions, which makes clear communication, FAQs, and support crucial.
Additionally, some states may enforce the $600 threshold earlier, adding extra compliance requirements. Finally, lower thresholds will increase the number of 1099-K forms issued, so businesses must rely on automated, scalable systems to manage the higher volume efficiently.
What is Notice 2024-85?
Notice 2024-85 provides interim relief to payment platforms by phasing in the new 1099-K reporting thresholds, reducing the immediate burden of compliance with the $600 threshold. With this notice, platforms will not be penalized in 2024 or 2025 if they report according to the phase thresholds 2025.
Platforms can opt to report at the $600 threshold if they can, even if customers object. Backup withholding for 2024 is still required to be reported, so accurate accounting must be maintained. Remember that some states do require enforcement of the $600 threshold without penalty relief, so obeying state regulations is critical.
Conclusion
The One Big Beautiful Bill Act of 2025 cancels the $600 reporting rule from the American Rescue Plan Act of 2021, restoring the Form 1099-K threshold to $20,000 in payments and 200 transactions. Staying on top of the new IRS 1099-K thresholds is key to easy tax compliance and proper reporting.
By monitoring payments diligently and keeping good records, companies can steer clear of penalties and report without any hassles. By staying proactive and organized, you can ensure your financial processes are ready to take these changes in easily.
FAQs
What is a 1099-K form?
A 1099-K documents payments made through payment apps, credit/debit cards, or online marketplaces for goods and services earned in the tax year.
Who requires a 1099-K?
Individuals or businesses who receive payments through card processors, apps, or marketplaces on sales of goods or services can receive a 1099-K.
When will I receive my 1099-K?
You must receive it by January 31 of the following year after the tax year, either electronically or by mail.
Are 1099-K payments taxable?
Yes, payments for goods and services are reportable, but non-taxable items such as refunds or fees can be subtracted.
How do I report 1099-K income?
Report it on Schedule C if self-employed, or on the appropriate tax forms for your business entity; personal sales may use Form 8949.