Why You Might Get a Form 1099-K and What it Means for Your Taxes

Two people seated at a table holding cell phones, the message "transaction completed" is visible on both screens

For the 2022 calendar year, if you received $20,000 or more in payments for goods and services and conducted more than 200 transactions processed by a third-party payment network (like PayPal, Venmo, Square, Cash App, etc.), that income will be reported on Form 1099-K.   

The IRS has said they will change these thresholds beginning in calendar year 2023 (the return you’ll file in 2024). 

What is Form 1099-K, and why am I getting one? 

IRS Form 1099-K Payment Card and Third-Party Network Transactions is an informational tax form that tells the IRS how much income a person received in the form of electronic or credit/debit card payments for the sale of goods and services.  

If you conducted more than 200 transactions and received $20,000 or more from your customers by debit/credit card payments, or through apps like Venmo or PayPal, you should get an IRS Form 1099-K from any company that processed those transactions for you.  

Do I have to report my Form 1099-K? 

It’s important to report the information on your 1099-K correctly so you don’t end up paying too much or too little in taxes. Accurate reporting will help you avoid a surprise tax bill and decrease your chances of being audited.  

I get money from friends and family in PayPal. Are these transactions taxable? 

The IRS is clear that “reporting by third-party settlement organizations applies only for transactions for the provision of goods or services settled through a third-party payment network.”  

In other words, your personal transactions (with friends and family, for example) are not taxable.  

Can the IRS see my Cash App/Venmo/PayPal account? 

No, the IRS can’t directly see the activity in your payment apps.  

At tax time, the third-party processing company sends both you and the IRS a copy of your 1099-K. The info on 1099-K lets them know about the transactions that took place on your account during the tax year. It’s up to you to report and confirm these earnings on your tax return. 

How do I report my 1099-K in TaxSlayer? 

Your 1099-K payments get reported on Schedule C. TaxSlayer makes it simple to enter this info on your tax return. Simply follow the instructions in the program.  

If you’re receiving a 1099-K, you’re most likely self-employed. TaxSlayer Self-Employed is designed to make filing as easy as possible for your unique tax situation. Check out TaxSlayer Self-Employed

What if I didn’t get a 1099-K? 

If you think you should have received a 1099-K, but it hasn’t arrived by January 31, it’s a good idea to reach out to the third-party processor you use. 

Note: It’s always recommended that you keep good, independent records of your business income and expenses. That way, if the company did not prepare a 1099-K for you, you can still report your sales on Schedule C of the 1040 return. 

This article was last updated on 1/2/2023.

Disclaimer:
This article is intended to provide general information to the public and does not provide personalized tax, investment, legal, or business advice. You should seek the assistance of a professional for advice on taxes, investments, and any other financial, legal, or business matter pertinent to your individual situation.

Related Posts