If you received over $5,000 in payments for goods and services through an online marketplace or payment app in 2024, you should expect to receive a Form 1099-K in January 2025. A copy of this form will also be sent directly to the IRS.
Understanding Form 1099-K: What It Reports and Who Sends It
Form 1099-K is used to report payments you received during the year for goods or services. It covers transactions processed through:
- Payment cards: This includes credit cards, debit cards, and stored value cards like gift cards.
- Payment apps and online marketplaces: These are often referred to as third-party settlement organizations (TPSOs).
Note: Payments you got from family and friends should not be reported on Form 1099-K.
Reporting Threshold
TPSOs are required to issue Form 1099-K when payments for goods or services exceed the following thresholds:
- $5,000 in 2024
- $2,500 in 2025
- $600 in 2026 and beyond
These thresholds determine when a Form 1099-K is sent to both you and the IRS.
The IRS is phasing in these new reporting thresholds, but the rules on taxability of income remain unchanged. All income from part-time work, side jobs, or the sale of goods and services is taxable unless excluded by law.
Even if you don’t receive a Form 1099-K, you must report all income on your tax return. The absence of this form doesn’t exempt you from paying taxes on income earned.
What to Do If Your Form 1099-K Has Incorrect Information
Correcting Errors on Form 1099-K
If your Form 1099-K contains errors, such as an incorrect Taxpayer Identification Number (TIN) or gross payment amount, take these steps:
Steps to Correct the Form
- Request a Corrected Form: Contact the issuer using the “Filer” contact details in the top left corner of the form. If the issuer is unfamiliar, contact the Payment Settlement Entity (PSE) listed in the bottom left corner, above your account number.
- Keep Records: Save a copy of the corrected Form 1099-K and all correspondence with the issuer or PSE.
Filing Taxes with Incorrect Information
Even if a corrected form isn’t available by the tax filing deadline, don’t delay filing your return. Here’s what to do:
- Incorrect TIN: Report payments from the Form 1099-K along with all other income on your return.
- Incorrect Gross Payment Amount: Adjustments and explanations should be made as directed in the IRS guidelines.
- Do not contact the IRS directly about Form 1099-K errors. Work with the issuer or Payment Settlement Entity (PSE) to resolve issues, but ensure your taxes are filed on time.
Staying informed and proactive about your tax obligations will help ensure a stress-free tax season.
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.