IRS Form 1099-K
Form 1099-K is an IRS information return used to report payment card and third-party network transactions on a federal tax return for businesses, sole proprietors, individuals, and gig economy workers. The Form 1099-K includes the gross amount of all payment transactions from each payment settlement entity from which you received payments, including payment card transactions and third-party network transactions (via Venmo, Zelle, Cash App, PayPal, etc.).
Form 1099-K for 2023
On November 23, the IRS delayed the reporting threshold amount of $600 for third-party networks for one more year. The new reporting requirement will go into effect in 2024 and the threshold amount will be phased-in until the $600 threshold is reached in a future year.
Form 1099-K for 2024
Beginning in 2024 the reporting threshold will tentatively be $5,000. This means a third-party network must report all transactions that involve the selling of goods or that are for performing services if the total transactions for any individual exceeds $5,000 during 2024.
Reporting Venmo, Cash App, Zelle, PayPal, Apple Pay Transactions
This means that individuals who used a third-party payment network (such as Venmo, Cash App, Zelle, PayPal, or Apple Pay) to sell goods or to receive income for providing services for $600 or more will receive a Form 1099-K (Payment Card and Third-Party Transactions) in early 2024.
How to Report Form 1099-K Information on Your Tax Return
The following individuals who receive a Form 1099-K from a third-party network in early 2024 that are for the sale of goods in the individual’s business, for services provided or certain sales of personal items must report this income on their 2023 federal return as follows:
Sole Proprietors and Farmers
Sole proprietors or farmers that receive income for goods and/ or services related to their business or farm. The income must include the amounts from their 1099-K with other amounts of income they received and report the total on Schedule C (Profit or Loss from Business) for sole proprietors and Schedule F (Profit or Loss from Farming) for farmers.
Rental Income
Individuals who receive rental income either for long-term rentals or short-term must report this income on Part I of Schedule E (Supplemental Income and Loss).
Income from Gold, Silver, Coins, and Gems
Individuals who sell personal items, such as gold, silver bullion, coin or gems, that they are holding as an investment must report the sale on Form 8949 (Sales and Other Dispositions of Capital Assets) and recognize either a long-term or short-term capital gain or loss.
Selling Personal Property
Individuals who sell a personal item that resulted in a gain must report the gain as a short-term capital gain on Form 8949.
Uber and Lyft Income Tax Reporting
Individuals who do Gig work such as for Uber or Lyft must report this income on Schedule C.
Form 1040 Schedule 1
For individuals who receive a 1099-K for amounts between $600 and $20,000 in the following scenarios, the IRS has stated in the Form 1040 instructions for Schedule 1, line 8z and 24z how to report the following on their federal tax return:
Sold Personal Items at a Loss
If the sale of personal items such as a car, appliances, furniture, household items, etc. resulted in a loss, the amount from the Form 1099-K should be entered as follows on Form 1040, Schedule 1:
- Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 8z and in the entry line next to line 8z enter “Form 1099-K Personal Item Sold at a Loss – $XXXX (Amount from the Form 1099-K)”.
- Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 24z and in the entry line next to line 24z enter “Form 1099-K Personal Item Sold at a Loss – $XXXX (Amount from the Form 1099-K)”.
Received Form 1099-K in Error
For those individuals who receive a Form 1099-K for the sale of personal items or in error they should report these transactions as follows on their federal return:
- Received a 1099-K in error and are unable to have it corrected by the payer. The amount from the Form 1099-K should be entered on Form 1040, Schedule 1 as follows:
- Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 8z and in the entry line next to line 8z enter “Form 1099-K Received in Error – $XXXX (Amount from the Form 1099-K)”.
- Enter the amount from line 1a from the Form 1099-K on Schedule 1, line 24z and in the entry line next to line 24z enter “Form 1099-K Received in Error – $XXXX (Amount from the Form 1099-K)”.
Additional 1099-K Resources
For more information see the following on the IRS website:
CrossLink Professional Tax Software
CrossLink is the industry’s leading professional tax software solution for high-volume tax businesses. Built based on the needs of busy tax offices and mobile tax preparers that specialize in providing their taxpayer clients with fast and accurate tax returns, CrossLink has been a trusted software solution since 1989. CrossLink’s in-depth tax calculations, advanced technological features, and paperless solutions allow you to prepare the most complicated tax returns with confidence and ease while providing your customers an unparalleled experience.
