What Is a 1099-K? A Guide to the New Rules for 2025

IRS 1099-K, Payment Card and Third Party Network Transactions, has a reputation for sowing anxiety among gig workers, freelancers, online sellers, sole proprietors, small business owners, and other self-employed taxpayers thanks to frequent rule changes and amounts that rarely match their own books. After years of uncertainty, the 2025 tax year finally offers business owners and independent contractors some clarity.

While the IRS Form 1099-K reporting thresholds were scheduled to drop to $600 for the 2026 tax year and beyond, Congress reversed that planned reporting trigger, restoring the long-standing $20,000 and 200-transaction threshold under the One Big Beautiful Bill Act (OBBBA), easing the burden for casual sellers while still giving the IRS insight into high-volume commerce.

This guide explains what IRS Form 1099-K is, why you might receive it, and—crucially—how to turn the gross numbers it reports into the taxable income your business actually owes.

Key Highlights

• The federal IRS Form 1099-K threshold for 2025 is now $20,000 or more in payments and 200 or more transactions—not the previous figures that caused confusion.

• Marketplaces, payment apps, and card processors—not your customers—issue the form, typically by January 31 each year.

• Gross payments are not taxable profits. Deductible expenses, refunds, and non-business transfers must be removed before filing.

• Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), IRS Form 8949, Sales and other Dispositions of Capital Assets, or Schedule D (Form 1040), Capital Gains and Losses, handle the income, depending on whether the sales were business activity or personal property.

• Meticulous bookkeeping and year-round business tax advice prevent duplicate reporting with IRS 1099-NEC, Nonemployee Compensation, and IRS Form 1099-MISC, Miscellaneous Information, helping to keep audits at bay.

Decoding Form 1099-K: What It Is and Why You Received One

IRS Form 1099-K reports the gross amount of payments you processed through platforms and online marketplaces such as:

• PayPal

• Square

• Stripe

• Uber

• Venmo

• eBay

• Etsy

• Other credit card merchant accounts

The payment settlement entity is responsible for issuing IRS Form 1099-K, not your buyers.

When Should You Expect to Receive a 1099-K?

Payment platforms must furnish Form 1099-K by January 31 following the tax year. If you crossed the federal or a state-specific threshold, look for the form in your inbox or mailbox around that date.

There may be instances where a payment platform fails to send you the proper materials by the end of January. If this occurs, contact the payment platform immediately, as it is still your responsibility to report that income by the deadline. 

1099-K vs. 1099-NEC vs. 1099-MISC

Because processors and clients don’t typically communicate, you might get a Form 1099-K and a Form 1099-NEC for the same dollars, creating a duplicate reporting risk. Accurate books let you reconcile and correctly report these numbers.

Understanding 1099-K Thresholds

The Current Federal Threshold, Reinstated

The OBBBA restored the legacy rule: processors issue a Form 1099-K only when you exceed both $20,000 in gross payments and 200 payment transactions in a calendar year. This shift away from a much lower reporting threshold eliminates millions of casual independent sellers from the federal tax filing net.

State-Specific Rules May Still Apply

Several states keep lower reporting triggers, often $600 or even $0, including: 

• Massachusetts

• Virginia

• Maryland

• Vermont

• Illinois

Federal relief does not override those statutes, so multistate sellers, which are common for e-commerce businesses, must monitor each jurisdiction and conform to their reporting rules. This is where the industry- and state-specific expertise of a trusted CPA or accounting team is essential.

Note that the IRS’s Form 1099-K FAQs list state thresholds and will be updated as legislatures revise their rules.

From Gross Amount to Taxable Income: A Practical Guide

Separating Business vs. Personal Transactions

In addition to business sales, payment apps often mix in: 

• Reimbursements

• Gifts

• Shared-dinner transfers

Non-taxable personal transfers should never be reported on your Schedule C. Robust, real-time bookkeeping flags and labels each entry so only accurate business revenue stays in your income bucket.

Calculating Profit for Your Business or Side Gig

Follow these steps to calculate the profit for your main business or your thriving side gig. 

1. Start with the Form 1099-K gross total.

2. Subtract direct costs: cost of goods sold, merchant fees, shipping, advertising, and packaging.

3. Deduct overhead: home office percentage, mileage, phone, and software subscriptions.

4. The remainder is net profit, the figure that belongs on Schedule C.

Year-round full-service bookkeeping from 1-800Accountant ensures every business expense is captured and matched to income, so you are never guessing at tax time.

Correctly Reporting the Sale of Personal Items

Whether you made a profit or sold a used personal item at a loss, it's crucial to report payments on the correct tax forms to the proper authorities.

Selling an old camera for more than you paid? Report the gain on IRS Form 8949 and Schedule D. Sold it at a loss? Note the proceeds on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, line 8z to show it is not taxable. Losses on personal property are not deductible.

A Step-by-Step Guide to Reporting Your 1099-K

Verify, Reconcile, Report

Take the following actions to verify, reconcile, and report your business income. 

• Match the TIN, merchant ID, and gross amount against your ledger.

• Reconcile duplicates with any 1099-NEC or 1099-MISC forms, adjusting books rather than the IRS form itself.

• Report on the proper schedule: Schedule C for business and IRS Form 8949 for capital gains.

Affordable, full-service tax preparation from 1-800Accountant takes the guesswork out of form choice and keeps every figure consistent across schedules. 

What to do if your Form 1099-K is incorrect

Review each IRS Form 1099-K you receive immediately to ensure the tax information is correct. If you spot an error, contact the processor for a corrected version.

If the payment processor refuses to issue a corrected form, which is rare, or doesn't issue it in time for the March 31 e-file deadline, disclose the mismatch on your return—often by adding an explanatory statement—and retain proof.

Professional audit defense looks out for your interests and provides peace of mind in the event the IRS still questions the variance.

Proactive Management for Financial Clarity

Importance of Strategic Bookkeeping

Accurate, category-level books turn Form 1099-K income from a stressor into an analytic tool. The clean data it provides reveals:

• Profit leaks

• High-fee channels

• Pricing gaps

Dedicated bookkeeping services ensure that when a 1099-K arrives, you have a clear, reconciled picture of your actual taxable income.

The Value of Year-Round Tax Advisory

Form 1099-K rules change, among other developments, while personal circumstances evolve. Rather than being taken by surprise each April, an advisory relationship with a CPA or other tax professional helps you: 

• Forecast liabilities

• Time equipment purchases

• Adapt to new legislation

Unlocking Your Business Potential with 1-800Accountant

The IRS Form 1099-K threshold has been simplified at the federal level, but the core challenge remains separating gross payments from taxable profit. Mastering the gap between gross payments and these profits is the real challenge—even with a higher threshold, without experts on your side. 

1-800Accountant, America's leading virtual accounting firm, offers affordable, tax-deductible solutions designed to support your operations, including integrated bookkeeping, tax, and advisory services that give you real-time clarity, compliance, and the confidence to focus on your next business milestone.

Schedule a free call, usually 30 minutes or less, to see how our experts can streamline your complex financial work, transforming it from a frustration to a competitive advantage. 

FAQs for Form 1099-K

Do I need to report income if I didn’t receive a 1099-K?

Yes. Income is taxable based on the activity that generated it, not on whether you received a form. Keep accurate books and include all earnings on your return, even if no Form 1099-K arrives in time for tax day.

What should I do if I get multiple 1099-Ks from different platforms?

If you hit the reporting thresholds on different platforms, you can expect to receive multiple forms. Here's what to do: add the gross amounts together, remove any duplicates that also appear on 1099-NEC or 1099-MISC forms, and reconcile the total to your bookkeeping records before reporting it.

Can hobby sales or one-time transactions trigger a 1099-K?

It is possible, particularly for hobby sales, to trigger a Form 1099-K reporting obligation. For 2025, more than $20,000 and 200 transactions will trigger this obligation at the federal level, though some states have embraced much lower thresholds.

How do I handle refunds or chargebacks included in my 1099-K total?

Handling refunds or chargebacks included on your 1099-K form is relatively straightforward. Subtract them as returns or allowances on Schedule C so you’re taxed only on net revenue. Maintaining real-time records simplifies this adjustment.

What happens if my personal payments (like splitting rent or utilities) show up on my 1099-K?

Exclude personal transactions so that they exclusively reflect business performance. Reclassify those transfers in your ledger as non-business transactions and remove them from the taxable income on your return. Attach an explanatory note if the mismatch is significant.

How does the IRS use 1099-K data to flag underreported income?

Payment processors will send you a Form 1099-K and a copy to the IRS. The IRS matching system compares the gross amounts reported on Form 1099-Ks to the income you list on Schedule C or other schedules with your income tax return. Clarity is vital as large, unexplained gaps can trigger notices or audits.

Can I dispute a 1099-K if I believe it was issued in error?

If you see errors on your Form 1099-K, it is critical to take action as soon as possible. Contact the payment processor for a corrected form. If they don’t respond or don't respond in time, file your return with the correct figures and add a brief statement explaining the discrepancy.

For deeper background, the IRS hosts a concise Understanding Your Form 1099-K page and a searchable Gig Economy Tax Center that addresses common scenarios.