If you receive a 1099-K form this year, it’s important to know what this is and why you’re receiving it. Although these forms are nothing new, many people have never heard of them and receiving one may spark some confusion or concern. You’re not getting it by mistake, and it is an actual document from the IRS.
What is a 1099-K Form and Why Did I Get One?
A 1099-K form is what is required by the Internal Revenue Service (IRS) to report payments received through payment card transactions and third-party networks. Payment card transactions can include debit cards, stored value cards, or credit cards. Third-party payments like Venmo, PayPal, Zelle, Etsy, and others are also included for reporting. Recent changes to the guidelines for payments received through payment card transactions and third-party networks means more people will receive 1099-K forms. In 2021, the threshold for payments from third-party networks was $20,000 and more than 200 transactions. This year, the threshold is $600 with no threshold on transactions. A 1099-K is assumed to be income and is typically reported on the Schedule C. Depending on the conditions, you may need to take special action regard the 1099-K form and any errors need to be dealt with since it’s reported income.
What Types of Transactions are Included on a 1099-K?
A 1099-K will include all transactions from both payment card transactions and third-party networks that total in $600 or more. The form will include all transactions that you made to friends or family, in addition to monies from items sold, good related to your hobby, or business transactions. Here are some common transactions that may be included on your 1099-K.
- Money received from family or friends (including reimbursements) via Zelle, PayPal, Venmo or other similar apps
- ‘Cash Out’ transactions from social media sites like TikTok and YouTube
- Income from AirBnB or VRBO
- Income from rideshare services like Uber or Lyft
- Profits from food delivery apps, such as DoorDash and Grubhub
- Profits from your Esty store
- Income from your eBay sales
- Facebook Marketplace Transactions
- Event Ticket resales through Ticketmaster
There are many other types of transactions that may be included on a 1099-K. Although these transactions are included on the form, you may not have to pay taxes on some. However, all transactions included, must be reported.
What To Do If You Get a 1099-K Form
If you receive a 1099-K, all you need to do is make sure you report it with your taxes. Even if your transactions are less than $600 and you receive a form, you have to report it. If you have questions or don’t know why you received a 1099-K, our team at BFG Tax Help in Richardson, TX can assist you. Call us today with any questions you may have or to schedule an appointment.