How to Report Form 1099-K Income on Your Tax Return

Form 1099-K, Payment Card and Third Party Network Transactions, is an information return the Internal Revenue Service (IRS) uses to track payments. If you receive money for goods or services through platforms like PayPal, Stripe, or from credit card processors, you might receive this form. It captures the total dollar amount of transactions processed for you in a calendar year. The amount shown on the form is a gross figure and does not automatically represent your taxable income. It is a starting point that does not account for business expenses, refunds, or other adjustments.

Who Receives a Form 1099-K

A Form 1099-K is issued by a Payment Settlement Entity (PSE), a company that facilitates payments between buyers and sellers. PSEs include credit card companies like Visa and Mastercard, as well as third-party settlement organizations (TPSOs) such as PayPal, Venmo, and Square. These organizations are required to send the form to you and the IRS by January 31 of the year following the transactions.

The federal requirement for when a TPSO must issue a Form 1099-K has changed. For many years, the threshold was over $20,000 in payments and more than 200 transactions. The American Rescue Plan Act of 2021 lowered this threshold to $600, but the IRS has delayed its implementation and announced a phased-in approach.

For the 2024 tax year, a TPSO is required to issue a Form 1099-K if payments for goods and services exceed $5,000. For the 2025 tax year, this threshold is set to decrease to $2,500, while the $600 threshold is currently anticipated to take effect for the 2026 tax year.

These are federal minimums, and some states have established their own, lower reporting thresholds. A PSE can also voluntarily choose to send a Form 1099-K even if payment amounts are below the mandated federal requirement. Regardless of whether you receive a form, all income from selling goods or services must be reported on your tax return.

Understanding the Information on Your Form 1099-K

The figure in Box 1a of Form 1099-K, “Gross amount of payment card/third party network transactions,” represents the total, unadjusted dollar value of all payments processed on your behalf. This gross amount does not reflect your net income because it is calculated before the deduction of any expenses or adjustments.

For example, the Box 1a figure does not account for shipping costs you paid, refunds issued to customers, or the processing fees charged by the payment platform itself. Think of this amount as the starting line for your income calculation. Your actual taxable income will be a different, lower figure after you account for all legitimate business expenses.

Reconciling Form 1099-K with Your Records

After locating the gross amount in Box 1a, you must compare this figure with your own business records to determine your actual, reportable business income. The amount on the form may be higher than the income you actually retained.

A common reason for a discrepancy is the inclusion of non-business transactions. For instance, if friends or family sent you money as a personal gift or reimbursement and it was mistakenly tagged as a payment for “goods and services,” it may be in the 1099-K total. You must identify these personal, non-taxable payments in your records and subtract them from the Box 1a amount.

You must also account for any refunds or returns you issued to customers throughout the year. The gross amount on the 1099-K will not reflect these reversed transactions. Sum up all refunds and chargebacks from your sales records and subtract this total from the gross figure. The result of this reconciliation is your true gross receipts, which is the figure you will use for tax reporting.

Reporting Form 1099-K Income on Your Tax Return

Once you have reconciled your records to find your correct gross receipts, you must report this income on the appropriate tax form. For most self-employed individuals, gig workers, and sole proprietors, this means using Schedule C (Form 1040), Profit or Loss from Business. The reconciled gross receipts figure is entered on Line 1, “Gross receipts or sales.”

Do not report the exact number from Box 1a unless it perfectly matches your calculated gross receipts. If you received multiple 1099-K forms, sum the reconciled gross receipts from all of them and report the total on Line 1 of your Schedule C.

After reporting your gross income, you will deduct your business expenses on the subsequent lines of Schedule C. These deductions include costs such as:

• Payment processing fees
• The cost of goods sold
• Advertising
• Supplies
• Other ordinary and necessary business expenditures

Subtracting these total expenses from your gross receipts determines your net profit or loss on Line 31, which is the amount subject to income and self-employment taxes.