Where Do You Report 1099-K on a Tax Return?

Receiving a Form 1099-K, “Payment Card and Third Party Network Transactions,” is an increasingly common informational document. This form is sent by third-party settlement organizations (TPSOs), which include payment apps like PayPal and Venmo, online marketplaces such as eBay, and credit card processors. These companies are required to issue a 1099-K to you and the IRS when payments you receive for goods or services exceed certain thresholds. For the 2025 tax year, the federal threshold is over $5,000.

The form reports the gross amount of payment transactions processed for you, but it does not automatically mean the entire amount is taxable income. Its purpose is to provide a record to help you accurately report your income, and it is your responsibility to determine which figures are taxable.

Determining the Nature of Your Income

Before reporting the amounts from a Form 1099-K, you must classify the nature of the transactions. The proper tax treatment depends on why you received the money, as your transactions will fall into one of a few categories.

Business Income

Payments received for work you perform as a self-employed individual, independent contractor, or freelancer are considered business income. This includes revenue from gig work, such as driving for a ride-hailing platform, or sales from an online store you operate as a business. If you engage in an activity with a clear intent to make a profit and do so with regularity and continuity, the IRS views it as a business.

Hobby Income

Hobby income comes from activities you do for sport or recreation, not for profit. For example, if you occasionally sell handmade crafts but do not depend on the income and have no real profit motive, the proceeds are likely hobby income. The distinction between a business and a hobby hinges on your intent, and the IRS looks at factors like whether you carry on the activity in a businesslike manner.

Sale of Personal Items

If you received a 1099-K for selling personal belongings online, such as used furniture, clothing, or collectibles, these transactions are classified as the sale of personal items. These are considered capital assets. The tax implications depend on whether you sold the item for more or less than your original purchase price.

Non-Taxable Transactions

The form may include non-taxable personal payments, such as a gift from a family member or a reimbursement from a friend for a dinner bill. These transactions are not for goods or services and should be separated from income-generating activities when you prepare your tax return. Keeping separate accounts for business and personal transactions can simplify this classification.

Reporting Business or Hobby Income

Income from self-employment or a side business is reported on Schedule C (Form 1040), Profit or Loss from Business. The gross amount of payments for your goods or services from your Form 1099-K is reported on Line 1, “Gross receipts or sales.” After reporting gross receipts, you can deduct the ordinary and necessary costs of doing business, such as supplies or advertising, to determine your net profit or loss.

If your activity is a hobby, you must report the income on Schedule 1 (Form 1040), Additional Income and Adjustments to Income. The total amount from your 1099-K related to the hobby is entered on the “Other income” line with a description like “Form 1099-K Hobby Income.” Unlike business income, you cannot deduct expenses associated with your hobby.

Reporting the Sale of Personal Items

Proceeds from selling personal property are reported on Form 8949, Sales and Other Dispositions of Capital Assets, and the information flows to Schedule D, Capital Gains and Losses. To report these sales, you must determine your “cost basis,” which is what you originally paid for the item, including costs like sales tax or shipping.

If you sold a personal item for more than your cost basis, you have a taxable capital gain. On Form 8949, report the sales price from your 1099-K, your cost basis, and the resulting taxable gain. For example, selling a collectible for $1,000 that you bought for $400 results in a $600 taxable gain.

If you sold a personal item for less than your cost basis, you have a personal capital loss. Losses on the sale of personal property are not deductible. However, you must still report the transaction on Form 8949 to account for the proceeds shown on the 1099-K. You would list the sales price and your higher cost basis, then use an adjustment code to show a $0 gain. This method zeroes out the transaction for tax purposes and demonstrates to the IRS that you have accounted for the reported proceeds.

Addressing Discrepancies and Non-Taxable Transactions

If your Form 1099-K includes a mix of business income and non-taxable personal payments, you must reconcile this on your tax return. When filing a Schedule C, report the full gross amount from the 1099-K on Line 1. You then subtract the non-taxable portion in Part V, “Other Expenses,” with a description like “Non-taxable reimbursements from family/friends.”

This method ensures your return’s gross income matches the amount reported to the IRS while correctly removing non-taxable funds from your business income. Keeping detailed records, such as notes on payment app transactions or using separate bank accounts, is important for substantiating these adjustments.

If you believe the Form 1099-K is incorrect because it shows the wrong amount, is a duplicate, or was issued in error, contact the payment settlement entity that issued it. Their contact information is on the form. Explain the error and request a corrected Form 1099-K.