What Is a 1099-K and What to Do If You Receive One
Sam's List Editorial | 2026-07-15
What Is a 1099-K and What to Do If You Receive One A 1099-K is an information return that payment platforms send you and the IRS to report the money you received through them during the year. If you take card payments or get paid through an app like PayPal, Venmo for business, Stripe, or a marketplace, you may get one. The single most important thing to understand up front: a 1099-K reports gross payments processed, not your taxable income. Those are very different numbers, and confusing them is where people get into trouble. What a 1099-K Actually Is A 1099-K comes from a third-party settlement organization or payment processor, meaning the company that moved money from your customers to you. It shows the total gross amount of reportable payment transactions they handled for you, usually broken out by month. It does not subtract fees, refunds, chargebacks, or the cost of what you sold. It does not know which payments were business income and which were a friend repaying you. It is simply a report of dollars that flowed through that platform to you, and a copy goes to the IRS. The Current Reporting Threshold For a while, the rule was in flux. A 2021 law was set to drop the federal reporting threshold to just $600, which would have generated 1099-Ks for a huge number of casual sellers and side-hustlers. That change was repealed. The One Big Beautiful Bill Act, signed in July 2025, restored the earlier federal threshold. A platform is now generally required to send a federal 1099-K only when your gross payments through it exceed $20,000 and you have more than 200 transactions in the year. There is an important catch. Some states set their own, lower thresholds, so you may receive a 1099-K based on state rules even if you are under the federal limit. And a threshold only governs whether the form is issued. It does not change the underlying rule that your income is taxable whether or not you get a form. Why the Form Is Not Your Taxable Income Here is the mistake to avoid. If your 1099-K says $60,000, that is not what you owe tax on. Your taxable income is your revenue minus your legitimate business expenses, and often the gross number on the form is inflated relative to what you actually earned. Say you sold products and the platform processed $60,000. After refunds, platform fees, the cost of the goods you bought to resell, shipping, and other real expenses, your actual profit might be a fraction of that. You are taxed on the profit, not the gross, which is exactly why keeping your own records matters. What to Do When You Receive a 1099-K Work through...
