Everything You Need to Know About Form 1099-K

Do you accept credit card payments for your work? What about payments through apps like PayPal or Venmo? If you answered yes, you might receive a Form 1099-K.

What is Form 1099-K?

At this point, you’ve probably heard about the 1099-NEC and 1099-MISC forms. They're part of the IRS’s 1099 series. Basically, every form that starts with “1099” is going to report some category of non-W-2 income.

Form 1099-K is another hugely important form in this series. It’s issued by credit card companies and third party payment processors like Stripe, PayPal, Cash App, or Venmo. These service providers are broadly referred to as “Payment Settlement Entities” (PSEs). A payment app or online marketplace that operates a qualifying payment network is called a third-party settlement organization (TPSO).

You might receive a 1099-K from:

• A credit or debit card processor (like Visa, Mastercard, American Express, and Discover)

• A payment app used for goods or services (like Stripe, PayPal, Shopify — but not Zelle

• An online marketplace (like Depop, Poshmark, Etsy, and TikTok Shop)

• A gig-work or freelance platform (like Fiverr and Upwork)

• A ticket, craft, or resale marketplace (like Stubhub)

Who should receive a 1099-K?

Long story short, you'll only be guaranteed to get a 1099-K if you made at least $20,000 and had 200 transactions.

However, the federal threshold depends on how the payment was processed.

Keeper pro tip: The threshold only determines when a TPSO must issue Form 1099-K. It does not decide whether a payment is taxable. A freelancer who earns $8,000 through a payment app may not receive a federal form, but the business income is still generally reportable.

You may receive Form 1099-K below the federal TPSO threshold when:

• Your state has a lower reporting threshold

• The platform chooses to issue forms below the required threshold

• Federal backup withholding applied

• You accepted a reportable payment card transaction

Does getting a 1099-K mean you owe taxes?

Not necessarily. Form 1099-K reports gross payments, not taxable profit!

Example: Form 1099-K for freelance work

Assume a freelance designer receives $25,000 through a payment platform. Form 1099-K shows $25,000 in Box 1a. The platform also charged $1,000 in processing fees, and the designer had $4,000 of other eligible business expenses.

The designer would generally start with $25,000 of gross business income. After subtracting $5,000 of eligible expenses, the simplified net profit would be $20,000.

Example: Selling a personal item at a loss

Assume you bought a couch for personal use for $1,500 and later sold it online for $700. The marketplace included the $700 on Form 1099-K.

You did not make a taxable profit because you sold the couch for less than it cost. You also cannot deduct the $800 personal loss. The IRS currently allows taxpayers to account for the payment using the dedicated Form 1099-K entry at the top of Schedule 1 or, in some cases, Form 8949.

Example: Selling a personal item at a gain

Assume you bought a collectible for $500 and sold it for $900. Your gain is generally $400 before any applicable adjustments. Report the sale and calculate the gain on Form 8949 and Schedule D. Do not treat the full $900 of proceeds as profit!

1099-K vs. 1099-NEC: What’s the difference?

As I've mentioned, 1099-K and 1099-NEC are very similar in nature. Both can report payments made to independent contractors. So if you're a contractor, you might end up with both types of forms at tax time.

Still, there are a few important differences. And you shouldn't get a 1099-K and a 1099-NEC for the same payment. (That said, sometimes this does happen. Learn what to do about it in the section on double-reporting!)

Here are the main differences between the two forms.

1. 1099-Ks are for cards and payment apps

The main difference is the types of payments they both report. Basically, the 1099-K covers all digital transactions that aren’t ACH, EFT, or direct deposit. Those are covered by the 1099-NEC, which also covers payments by cash and check.

Here’s a simple summary of how the two forms are used:

2. 1099-Ks cover bigger amounts — for now

For 2026 payments, a contractor has to make a lot more to be sure they'll get a 1099-K at tax time. That's $20,000, split up across at least 200 business transactions.

In comparison, to get a 1099-NEC, they'll only need to earn $2,000.

3. 1099-Ks are sent by payment processors, not individual clients

If you're a contractor, your clients are responsible for sending out your 1099-NECs. Your 1099-Ks, on the other hand, will come directly from the payment apps or credit card companies they used to pay you.

This distinction doesn't especially matter if you're only ever on the receiving end of 1099s. It doesn't matter whether your form comes from Linda, the real estate agent who hired you for some VA work, or if it's sent directly from Visa. You'll use it the same way when you file your taxes.

If you use contract labor yourself, though, it does matter who's responsible for issuing these forms. Say Linda paid three contractors last year, using three different payment methods.

Contractor A will receive a 1099-K, because all of their payments were made by credit card.

Contractor B will receive both a 1099-K and a 1099-NEC (depending on the amounts involved). For example, if they only received cash payments of $599, they would not need to be issued a 1099-NEC.

Contractor C will only receive a 1099-NEC, since all of their payments were cash.

"Businesses that used third-party apps like PayPal and CashApp to pay freelancers do not have to create a 1099," says Jason Green, the Indiana-based tax consultant.

Note that Zelle's unique status makes it an exception here: the IRS essentially treats Zelle payments like ACH payments. "If you pay a freelancer through Venmo or PayPal, you don't have to issue them a 1099-NEC," says Kari Brummond, a tax preparer and writer on tax-related issues. "If you pay them through Zelle [though], you do."

What to do if you get a 1099-K and 1099-NEC for the same payment

You shouldn't get two different forms for the same payment. But if you do end up with "double-reported" income, don't worry — you won't have to pay taxes on it twice.

"Be careful not to double report income when [doing your taxes] with tax prep software," says Kristine Stevenson Seale, EA, a tax resolution specialist and author.

If you get both forms, Green recommends that you "report the income listed on 1099-K alone."

"Taxpayers should keep detailed records of their income and be prepared to provide those records in the case of a dispute," he says.

Why some clients send 1099-NECs when they aren't supposed to

Not all clients realize they shouldn't be issuing 1099s for payments they made through credit card or payment apps.

"I often see business owners erroneously issuing 1099-NECs when they don't need to," says Meg Wheeler, the CPA and finance coach. This usually happens "when they have paid the person via a third-party payment tool."

This can cause headaches for freelancers. But you can address double-reporting with your own records, notes Kari Brummond, the tax preparer and writer.

"Imagine that Venmo sends you a 1099-K for $25,000," she says. "A client that paid you through Venmo sends you a 1099-K for $10,000.

"Although you only made a total of $25,000, the IRS receives two documents and believes you earned $35,000. If you file and the IRS audits your return, you need to be able to prove that those 1099s reported the same income.

"That's easy to do as long as you have the right records."

When will you get your 1099-Ks?

Recipient copies are due January 31st, so expect them to start arriving in late January or early February at latest.

How to report Form 1099-K on your tax return

Keeper can help freelancers organize business expenses and prepare a return that includes self-employment income.

Will personal transactions show up on a 1099-K?

There’s a lot of confusion out there about this, so I want to set the record straight: the only accounts that will be issued 1099-Ks are those that are either:

• Listed as business or merchant accounts, or

• Personal accounts where the transactions are tagged as “goods and services,” rather than “friends and family”

That’s because personal transactions don’t count towards the 1099-K threshold. If your roommate venmos you their half of the rent, or your aunt sends you some birthday cash via PayPal, that shouldn’t show up on a 1099-K.

What if you use the same account for business and personal transactions?

That being said, it’s extremely common for self-employed individuals to commingle their accounts – meaning, they use the same accounts for business and personal transactions.

That means if you’re using a personal PayPal account for work, the payments you receive have to be tagged as “goods and services,” or you won’t be issued a 1099-K.

If you identify as any of the following, you should probably verify that your accounts are set up correctly:

• Freelancers

• Gig workers

• Independent contractors

• Side hustlers

• Members of a partnership or LLC

• Anyone else with business income

What happens if you get sent a 1099-K for personal transactions?

If a payment processor sends you a 1099-K by mistake, don't worry — you still shouldn't pay taxes on that income. Here's what to do.

1. Contact the payment processor

Let them know the form they sent was inaccurate because they've counted your personal transactions.

You should find their contact info on the upper left corner of the your 1099-K. Get in touch for them and ask for a corrected form.

What happens if you can't get your form corrected? That's okay — there's a way to fix that too.

2. Deal with the error on Schedule 1 of your Form 1040

The IRS gives you a playbook for dealing with "extra" income on your 1099-K, but it's a little convoluted. You'll use Form Schedule 1. This form is used to report income from miscellaneous sources — as well as income adjustments, which are subtracted from your income.

Here's what you'll do:

• Report the personal payment on Part 1 of your Schedule 1. You'll be using line 8z, for "Other Income." Put the type, put in "Form 1099-K Received in Error"

• Offset it on Part II of your Schedule 1. This part of the form deals with "Adjustments to Income." You'll use Line 24z, for "Other Adjustments." Again, put in "Form 1099-K Received in Error" for the type

This basically means you add the income on one part of the form, then immediately subtract it on another part.

Here's an example. Pretend your roommate venmoed you $700 for their half of the rent, and this got captured on your 1099-K by mistake. Here's what you'll put line 8z of your Schedule 1:

And here's what you put in line 24z:

What to do if your Schedule C income is less than your 1099-K income

Occasionally, your gross receipts on Schedule C might be less than what’s reported on the 1099-K.

This could be the result of commingling your business account with your personal account, or a timing difference.

For instance, the credit card company might include a transaction that was made on 12/31, but didn’t hit your bank account until January 3rd of the following year.

If that happens to you, be sure to keep notes explaining the difference. The IRS’s database is built to flag discrepancies between 1099 forms and the corresponding tax returns. They even designed custom notice letters for taxpayers who underreported their 1099-K earnings. So if you report less than the 1099-K, keep notes!

Understanding your 1099-K

To make sure you’re reading your 1099-K correctly when it’s time to file taxes, let’s take a peek at the key boxes on this form. They’re highlighted in red on the form below, so you can follow along:

Box 1a: Gross payments

As discussed above, box 1a is what you’ll report on your Schedule C as gross receipts. This is the only box that really matters for most taxpayers.

Box 1b: Card-not-present transactions

This box represents payments that were made with a credit card that wasn’t physically present or the credit card number was entered manually — such as payments online or phone payments. In many cases, box 1a and 1b will be the same.

Boxes 1c and 1d: Tips and tipped occupation codes

The 2026 form adds Box 1c for cash tips included in Box 1a and Box 1d for Treasury tipped occupation codes. These boxes may matter to workers applying the $25,000 federal deduction for qualified tips. Keep the form with records showing the type and amount of tips received.

Box 2: Merchant category code

A merchant category code is used to describe what industry the revenue is being generated in.

You don’t need to do anything with it, but it’s worthwhile to make sure it’s consistent with the NAICS code you pick for your Schedule C.

For instance, if you work in e-commerce, and the code on your 1099-K is 5812 - “Eating Places and Restaurants,” you should probably reach out to the 1099-K issuer and request a more accurate code.

Box 3: Number of payment transactions

Box 3 shows the number of reportable transactions, excluding refund transactions. It remains relevant because the TPSO threshold includes a transaction-count test.

Box 4: Federal withholding

Not many recipients are going to have federal or state withholding, but if you do, don’t miss it! Always be sure to report the withholding on box 4 or 8 on your 1040 return.

Box 5a-i: Monthly totals

These boxes divide the gross payments by month. They can help you compare the form with monthly platform statements.

Boxes 6 through 8: State information

These boxes can report state identification numbers, state payments, and state tax withheld. State rules may differ from federal rules.

PSE’s name and telephone number

The last box I want to call out is the contact info for the Payment Settlement Entity (PSE). If you notice a mistake on your 1099-K, this is the number you should call to correct the error.

What to do if your 1099-K is wrong

There could be a number of reasons why your 1099-K is incorrect, but let’s take a look at the most common – and what to do about each of them:

Information errors on your account

If your online account lists the wrong business name or tax ID number (SSN, EIN, or ITIN), your 1099-K will probably need to be corrected.

Reach out to the payment settlement entity listed on your form to have this information updated.

Personal account used for business

This is extremely common: many freelancers end up using their personal accounts for work and forget to have their customers tag payments as "goods and services." Consequently, the merchant doesn’t issue a 1099-K for their income.

If this happened to you, don’t fret! Simply report the business income that was made through your personal account last year, and get set up with a business account for all future payments. No need to contact your PSE and request a 1099-K.

Shared credit card terminal

In some instances, multiple people or businesses will share the same credit card terminal or merchant account. In those cases, inform the PSE which payments apply to your business so that your sales aren’t overstated.

Entity change

If your business entity changes during the year or you register for a new tax ID number or business name, the PSE will need to be informed.

Cashback payments

If you allow customers to get cash back using their debit card, it’s likely those will be reported on your 1099-K even though they aren’t revenue to you.

If that’s the case, you have two options. You can either:

• Contact the PSE and request a corrected 1099-K, or

• Report the cashback payments on your Schedule C under “Other expenses” or “Returns and allowances” to offset the overstated income.

General guidance for all 1099 forms: They should support the records you already have, not be relied upon to create them. Best practice is to keep track of your business income and expenses throughout the year, and use the 1099s you receive as additional verification.

The Keeper app can help streamline this process for you by tracking and sorting your business expenses as you go.

FAQs

Do I have to report income if I do not receive Form 1099-K?

Yes. The reporting threshold determines when a payment processor must issue a form. It does not determine whether business income or a gain is taxable!

Do I pay tax on the full amount in Box 1a?

Not automatically. Box 1a shows gross payments before fees, refunds, discounts, shipping, and the cost of items sold. You should account for these and related business expenses to avoid overpaying taxes.

Why did I receive Form 1099-K below $20,000?

You may have received reportable payment card transactions, your state may use a lower threshold, the platform may issue forms voluntarily, or backup withholding may have applied.