How to Report Income From a Form 1099-K

Form 1099-K, Payment Card and Third Party Network Transactions, is an informational document used to report payments for goods and services to the IRS. You receive this form from a Payment Settlement Entity (PSE), like a payment app or online marketplace, if you meet certain transaction thresholds. It is not a bill or a form you fill out; instead, you use the information it contains, along with your own financial records, to accurately calculate and report your income on your federal tax return.

Understanding the Boxes on Form 1099-K

Payment settlement entities are required to send you a Form 1099-K by January 31st following the tax year. For the 2025 tax year, the federal reporting threshold for third-party settlement organizations is for payments that exceed $2,500. Some payment processors may issue the form for lower amounts, and you are required to report all taxable income regardless of whether you receive a form.

The form identifies the Filer (the PSE) and you as the Payee. Verify that your personal information, including your name, address, and Taxpayer Identification Number (TIN), is correct. Box 1a shows the “Gross amount of payment card/third party network transactions.” This is the total dollar amount of all transactions processed for you without any deductions for fees, commissions, or refunds.

The amount in Box 1a is the figure reported directly to the IRS. Other boxes include Box 3, which shows the total number of payment transactions, and Boxes 5a through 5l, which provide a monthly breakdown of the gross amount for your records.

Gathering Records for Reconciliation

Before reporting the income, you must reconcile the gross amount on Form 1099-K with your actual taxable income by gathering your financial records. Start by downloading annual summary reports from the payment platform that issued the 1099-K. These reports provide a breakdown of gross payments, showing deductions for platform fees, refunds, and other costs.

Compile your bank statements for the year and cross-reference the deposits with the payment summaries to confirm the amounts you received. You should also gather all records of your business expenses, such as receipts for supplies, invoices for services, and mileage logs if you used a vehicle for business.

Categorize the transactions bundled into the gross amount on the 1099-K. You will need to separate sales of business goods from sales of personal items, noting the original cost of any personal property sold. Also, identify non-taxable transactions, such as reimbursements from friends or family, that may have been processed through the payment platform.

How to Report 1099-K Income on Your Tax Return

After reconciling your records, report the income on the appropriate tax forms based on the nature of the transactions. Do not simply report the Box 1a amount as your final income without making adjustments for expenses and non-taxable amounts.

For a business you operate as a sole proprietor, use Schedule C (Form 1040), Profit or Loss from Business. Report the gross amount from Box 1a on Line 1, and then deduct your business costs in the expense section to determine your net profit or loss.

For hobby income, report the gross amount on the “Other income” line of Schedule 1 (Form 1040). While you must report this income, you cannot deduct expenses that exceed the income earned from the hobby.

The treatment of sales of personal items depends on whether they result in a gain or a loss. If you sold an item for less than you paid, the loss is not deductible, and the income is not taxable. If you sold it for more than your cost, you have a taxable capital gain to report on Form 8949, which flows to Schedule D (Form 1040).

If a 1099-K mixes taxable and non-taxable amounts, you must account for this. One method is to report the full Box 1a amount on Schedule 1 and then include an offsetting negative entry to zero out the non-taxable portion. This allows the IRS to match the reported income while correctly reflecting your adjusted gross income.

Requesting a Correction to Your Form 1099-K

If your Form 1099-K contains a factual error, you must have the issuer correct it. Common errors include an incorrect Taxpayer Identification Number (TIN), income attributed to the wrong person, or duplicate forms.

Contact the filer directly using the information on the form. Explain the error and be prepared to provide supporting documentation, such as bank records or proof of your correct TIN.

Formally request that the payment settlement entity issue a corrected Form 1099-K, which will have the “CORRECTED” box checked. Keep a detailed record of all your communications with the filer.

You must file your tax return by the deadline, even if you have not yet received the corrected form. Prepare your return using the correct information and attach a statement explaining the discrepancy if necessary. If you receive the corrected form after filing, you may need to file an amended return using Form 1040-X.