Form 1099K reports payments received through third-party payment networks, like PayPal or Venmo, and from payment card transactions. The IRS significantly lowered the reporting threshold for filing 1099K forms for the 2024 tax year.
If you receive over $5,000 in third-party network or card payments, you will be sent a 1099K that you must include on your return.
Be aware that if you have more than $5,000 in payments in 2024 but are not sent a 1099K, you are still responsible for reporting all income on your 1040, including income from payment networks and card transactions.
The IRS says that it is making this change to increase tax compliance.
How Does the 1099K Threshold Change In 2025?
For the 2025 tax year, the 1099K threshold will be even lower, dropping from $5,000 to $600. In other words, if you receive $600 or more in payments through third-party networks or from payment cards by the end of 2025, you will receive a 1099K and need to report that income when you file in April 2026.
What Payment Platforms and Third-Party Networks Use a 1099K Form to Report Payments?
Some examples of popular payment platforms and third-party networks that issue 1099K forms include:
Digital Wallets and Peer-to-Peer Payment Platforms
Apple Pay, Cash App, Google Pay, PayPal, Venmo
Online Marketplaces
Amazon, eBay, Etsy, Facebook Marketplace, Ticketmaster and other ticket sellers/resellers
Gig Economy Platforms
DoorDash, Fiverr, Grubhub, Instacart, Lyft, Uber, Upwork, Amazon Mechanical Turk (mTurk)
Other Payment Processors
Authorize.Net, Braintree, Crowdfunding platforms, Shopify Payments, Square, Stripe, WorldPay
When will you not receive a 1099K Form?
Personal payments from friends or family members do not need to be reported because the IRS does not consider them payments for services or goods.
Personal payments from friends or family members do not need to be reported because the IRS does not consider them payments for services or goods.
Also, Zelle does not currently provide 1099K forms for individuals or small businesses.
If you are not sure if you need to report third-party or card payments, ask a tax professional. You do not want the IRS to assess a penalty of up to 20% for underreporting income.
How Do You Report 1099K Forms On Your Tax Return?
How you report your 1099K income on your tax return depends on your business structure and income type.
For example, if you are the sole proprietor of your business, you report gross income from all 1099Ks on line 1 of Schedule C. You can also deduct business expenses essential for generating 1099K income.
Business expenses can include advertising costs, computers, travel, and other relevant items.
Keep in mind that if your business is an S corporation or partnership, you report 1099K income and expenses on Schedule E of Form 1040.
What are the Potential Penalties for Failing to Report 1099K Income?
- Failure to File Penalty: This penalty is imposed for each 1099K form not filed on time. The penalty amount increases the longer you wait to file.
- Accuracy-Related Penalty: If the amount included on a 1099K is inaccurate or incomplete, the IRS charges an accuracy-related penalty.
- Failure to Pay Penalty: If you fail to pay the tax you owe on your 1099K income, you may be assessed a failure to pay penalty.
The IRS can add interest and additional penalties on unpaid taxes incurred by failing to report 1099Ks.
Do You Need to Make Estimated Tax Payments for 1099Ks?
You must make quarterly estimated tax payments if you receive income from 1099Ks and expect to owe more than $1,000 in federal income tax for the year.
Estimated tax payments help individuals with 1099K income pay throughout the year rather than only when they file their returns. Making several estimated tax payments avoids penalties and interest charges on significant tax debt you cannot pay in one lump sum.
The IRS provides an online tool at https://irs.gov/individuals/tax-withholding-estimator to help you estimate your tax liability and determine your estimated tax payments for all income including 1099K.
Estimated taxes are due every three months, typically on April 15, June 15, and September 15, and January 15.
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