1099-K form: Everything you need to know

 

Form 1099-K has been around for a while, but it’s become more well-known and even somewhat of a hot topic due to a recent law change. Starting with tax year 2022, many more people — individuals and business owners alike — will be receiving a 1099-K and will generally need to report it on their returns.

1099-K form on a desk

So, what changed and what triggers a Form 1099-K? We’ll spell it all out here and help you understand what to do with any 1099-K you’ve received. Plus, if you received a 1099-K, you may wonder how it impacts your taxes. Don’t sweat it.

No matter what triggers your Form 1099-K, you can count on H&R Block to help you navigate your taxes. 

What is a 1099-K?

The 1099-K form reports payments and transactions from online platforms, apps or payment card processors over $600. If you’ve received money from platforms, like Venmo, PayPal, Facebook Marketplace, Etsy, Uber, etc. in 2022, you may find a 1099-K in your mail box next tax season.

Officially, this document is called “Form 1099-K: Payment Card and Third Party Network Transactions,” which may shed some light on why you got a 1099-K, but let’s dig a little deeper.

Why did I receive a 1099-K? What changed?

When the American Rescue Plan Act passed in 2021, it drastically dropped the 1099-k requirements for 2022 from $20,000 (and 200 transactions) to $600 from any one platform.  

Now, you may get a 1099-K if you:

  • Received money from friends or family via Venmo, Paypal or other payment apps.
  • Had hobby income from companies like Etsy.
  • Sold items from sites like Ebay or Ticketmaster.
  • Worked for app-based vendors like Uber or DoorDash.
  • Received real estate income from companies like AirBnB or VRBO.

This is just a short list of ways that may have generated a 1099-K for you. There are many other types of transactions that could trigger this form.

Plus, it’s possible you may receive Form 1099-K even if you didn’t hit the $600 threshold. Some business may send them regardless of the amount you received. In this case, you’ll still need to consider the amounts from your form on your taxes.

Here’s what’s important to know:  Not all 1099-K transactions are alike, and the tax treatment can vary. Whether it’s personal transactions, hobby income, business income or anything else, H&R Block can help you report income from your 1099-K. 

What is a 1099-K used for?

Now that you know what might generate a 1099-K, you might be wondering what you do with it. Unlike other 1099 forms, a 1099-K is used to report tax information to you and the IRS about any transactions you had on an app, online platform, or payment card processor. The platform will send two copies of your form: one to you so you can prepare your taxes and the other to the IRS.

Do I have to pay taxes on 1099-K?

This will largely depend on your situation.  If you received the form solely due to personal reimbursements — let’s say you were the person that collected all the money for a group shower gift or you receive rent money from your parents — you won’t owe taxes.

But if you received Form 1099-K for items you’ve sold (like a vintage record or grandpa’s antique watch), goods related to your hobby, or goods or services related to your business, there’s a bit more math and review involved. Generally, if you’ve made a profit, it’s possible you’ll owe taxes.

Whether you’re filing with H&R Block Online or with a tax pro, we’ll help you navigate your 1099-K.  

How do I report 1099-K income on my tax return?

How you report the income will depend on why you received it. Here are 1099-K instructions for a few common scenarios.

  • Personal transactions – You’ll report the amounts form your 1099-K on Schedule 1 (Form 1040), line 8z. You should include the Form 1099-K’s issuer’s name and Employee Identification Number (EIN). On the same form on line 24z, you’ll subtract the same amount. Again, you should include the issuer’s name and EIN.
  • Hobby income – You’ll report your gross hobby income on Schedule 1 (Form 1040, line 8z and include the Form 1099-K’s issuer’s name and EIN. Learn more about Hobby income.
  • Business income – If you’re a sole proprietor, like an independent contractor, you’ll report the income on Schedule C (Form 1040), line 1 and any returns or allowances on Schedule C, line 2. Additionally, you must calculate the cost of goods sold and report that on Schedule C, line 4. Then deduct associated business expenses in Part II of Schedule C.

 Get help with Form 1099-K

When it’s time to report the information on your Form 1099-K, you won’t have to do it alone. No matter what triggered your Form 1099-K, you can count on H&R Block to help you navigate any income you received from an online platform. 

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