This article will help you learn why your client received 1099-K forms and where to report them on a tax return.
Like the 1099-NEC, forms 1099-K are information returns that don't always go to the same line of the 1040. Instead, these documents provide information that you should use combined with your other tax records to determine the correct amount of income to report to the IRS.
For tax year 2023 returns: The IRS has implemented a new transition rule that delays reporting threshold changes. Your client may still receive 1099-Ks for transactions under the new, lower thresholds but they may not need to be separately stated in the tax return. Click here for more info.
For instructions on how to enter a 1099-K:
Why was my client issued a 1099-K?
The IRS announced a transition rule that delays the requirement for third-party settlement organizations like Venmo, PayPal, and CashApp to issue a 1099-K to anyone who received more than $600 aggregate payments.
That means for preparing most 2022 returns, you'll only see 1099-Ks issued when the old threshold of $20,000 in payments from over 200 transactions was met, or a payment card was used.
How do I know if 1099-K amounts are taxable?
No changes have been made to the taxability of income received through a third-party organization. These organizations should only issue a 1099-K if you used them to receive payments in exchange for goods or services.
For tax purposes, gross income includes your income from all sources - regardless of whether that income was reported on an information return like a 1099-K or 1099-NEC.
Personal transactions like sharing the cost of a car ride or meal, birthday gifts, or reimbursing a friend for a group purchase still aren't considered gross income.
For more info on what types of income are taxable and nontaxable, see IRS Pub. 525.
Where do I report taxable 1099-K income on my client's return?
Where you report the income depends on whether the 1099-K transactions were:
- related to a small business, like a Schedule C, or
- unrelated to a business, like a hobby, sales of personal items, reselling, or renting out personal property.
To report a business-related 1099-K:
Businesses should typically add up all their income from 1099-Ks, 1099-NECs, 1099-MISCs, and any other sources to report as gross receipts, sales, or rents. Where you report this total will depend on your business type and the specifics of what the payments were for.
|Form to use
|Line to use
|Line 1, gross receipts or sales
|Rental real estate
|Line 3, rents received
|Line 4, royalties received
|Line 1a, line 2, or line 37, based on your accounting method and type of sale
To report a 1099-K that wasn't related to a business:
|Where to report
|Sporadic hobby income
|Schedule 1, line 8j
|Rental of personal property
|Schedule 1, line 8l
|Gain from the sale of personal property
|Form 8949 and Schedule D
|Loss from the sale of personal property
|Schedule 1, line 8z and
Schedule 1, line 24z*
*Gains from the sale of personal property are taxable as capital gains, but losses from these sales aren't deductible from income, and can't be used to offset gains from other sales. When you have a loss from a 1099-K sale:
- report the proceeds on Schedule 1, line 8z; and
- report your cost on Schedule 1, line 24z to offset the proceeds. Don't enter an amount higher than your proceeds.
Enter a description of Form 1099-K personal item sold at a loss for both lines.
Your software will help you determine which transactions resulted in gains or losses and report them correctly.
Check the IRS fact sheet for more examples of 1099-K reporting and answers to frequently asked questions.
What if my 1099-K is wrong?
If your 1099-K includes amounts from transactions that you believe weren't reportable, like a roommate reimbursing you for rent, contact the issuer whose information is printed on the 1099-K.
If you can't get a corrected 1099-K, report the amount:
- as other income on Schedule 1, line 8z; and
- as an other adjustment on Schedule 1, line 24z.
Enter a description of Form 1099-K received in error on both lines.