Is This the Year You Finally Get a Form 1099-K?
This filing season, many taxpayers will — for the first time ever — receive a Form 1099-K, Payment Card and Third Party Network Transactions. The IRS now requires certain payment apps and online marketplaces to send you this form if you received more than $5,000 total for the sale of goods or services, regardless of the number of transactions, through their platform in 2024. For similar sales in 2023, the minimum thresholds for Form 1099-K reporting were more than $20,000 in receipts and more than 200 transactions. This substantial drop in the reporting thresholds could result in millions more taxpayers receiving Forms 1099-K this filing season than in prior years. The key purpose of the form is to ensure that individuals and businesses report their income accurately. The IRS uses this form to track payments that might otherwise go unreported or underreported, particularly those made outside of traditional payroll systems. It is important to remember, whether you receive a Form 1099-K or not, the income from the sales of goods or services is taxable, and you will need to include it on your tax return.
The organizations that may send you a Form 1099-K include but are not limited to:
- Auction sites;
- Car sharing or ride-hailing platforms;
- Craft or maker marketplaces;
- Crowdfunding platforms;
- Freelance marketplaces;
- Online marketplaces (sale or resale of clothing, furniture, and other items);
- Peer-to-peer payment platforms or digital wallets; and
- Ticket exchange or resale sites.
Example: Suppose that in 2024 you bought concert tickets and resold them for more than $5,000. That one sale could trigger Form 1099-K reporting. You could also receive a Form 1099-K if you made several smaller sales during the year on the platform and your total receipts exceed $5,000. The online marketplace will report the gross payments to you on a Form 1099-K on or before January 31, 2025, and send a copy to the IRS on or before February 28 (March 31 if filed electronically).
Falling Thresholds
The expansion of Form 1099-K reporting has been a long time coming. Legislation in 2021 lowered the reporting threshold from $20,000 to $600, which according to an estimate in 2023 would have led to an additional 30 million Forms 1099-K issued per year. Instead of fully implementing the $600 threshold immediately, the IRS delayed enforcement of the new rule for two years and is now slowly phasing it in.
Figure 1 (illustrates the Form 1099-K reporting thresholds starting in 2023)
| 2023 | 2024 | 2025 | After 2025 | |
|---|---|---|---|---|
| Dollar Threshold | $20,000 | $5,000 | $2,500 | $600 |
| Minimum Transaction Requirement | None | None | None |
More Requests for Social Security Numbers?
The recent IRS guidance on Form 1099-K could drive more payment apps and online marketplaces to request your taxpayer identification number, which for most people is a Social Security number. Starting in 2025, if you receive a payment for the sale of goods or services through apps or online marketplaces and haven’t provided them with a valid taxpayer identification number (or if you are otherwise subject to backup withholding), they must withhold 24 percent of the payments that are reportable on Form 1099-K. In prior years, this “backup withholding” requirement kicked in only for users who had made more than 200 reportable transactions, but starting in 2025, there is no such minimum threshold, nor does the $2,500 threshold apply for this purpose. Even casual sellers can face this withholding requirement starting with their first transaction if they don’t provide a valid taxpayer identification number.
In general, providing your taxpayer identification number helps you avoid backup withholding. If you end up with amounts withheld at the end of the year, don’t panic – when you file your tax return, you can get credit for the withheld amount and apply it to the tax you owe or potentially get a refund, just as you would for withholding reported on Form W-2. Any app or online marketplace that performs backup withholding must send you a Form 1099-K that tells you how much it withheld from your payments, even if you didn’t receive more than $2,500 in sales.
New Reporting Rules
New for tax year 2024, the IRS has added an entry space at the top of Schedule 1 where you report amounts included on Form 1099-K that relate to personal items you sold at a loss or payments that weren’t for the sale of goods or services (such as gifts and reimbursements). For example, suppose you resold concert tickets for $5,500 but originally spent $6,000 to buy them. You receive a Form 1099-K reporting gross payments of $5,500, but because you didn’t make a profit on the tickets, you report the $5,500 on this new entry space on Schedule 1 and don’t owe tax on that amount.
Similarly, if the Form 1099-K includes amounts in error, you can report those incorrect amounts on the new entry space on Schedule 1. If you find yourself in this situation, take a look at last year’s blog post on tips for avoiding incorrect Forms 1099-K.
When the amounts on a Form 1099-K relate to taxable income, in general, you
- report the gross amount from the Form 1099-K, and
- offset all non-taxable amounts so that you calculate the correct net taxable income.
Remember that the Form 1099-K only provides you with the gross amount you received through that online marketplace or payment app, without any reductions for fees, shipping charges, or refunds. You need to keep good records of your transactions and costs to determine how much of the gross amount you can offset.
The IRS is working to update its FAQs to explain the current reporting requirements in more detail.
Conclusion
The IRS at long last is phasing in the new lowered thresholds for Forms 1099-K. This means many taxpayers – including potentially you – may receive a Form 1099-K for the first time. If you receive a Form 1099-K, remember:
- Form 1099-K is not a bill. It provides you and the IRS information about your transactions for the year on a particular app or marketplace, but the form does not change the amount of tax you owe.
- Don’t ignore the form, even if you receive it in error or don’t owe tax on the amounts shown. Because the IRS also receives the form, it will expect you to correctly account for the information on your tax return.
- Keep good records of your transactions. This will help you or your tax return preparer offset the amounts on Forms 1099-K that are not taxable.
- Whether you receive a Form 1099-K or not, the income from the sales of goods or services is taxable, and you will need to include it on your tax return.
Resources
- What to Do With Form 1099-K
- Form 1099-K FAQs
- Tips for Avoiding Incorrect Forms 1099-K
- If You Resold the Hottest Ticket of Summer 2023, You Likely Didn’t Receive a Form 1099-K – But This Won’t Last Forever and Always
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