As part of its efforts to track income from the “gig” economy that may not be reported by some taxpayers, the IRS has expanded the use of a reporting form for online income: Form 1099-K.
Form 1099-K Reporting Threshhold
Taxpayers who sold items online or received money for services through payment apps may receive a Form 1099-K. For the 2025 tax year, the payment apps are required to issue both the taxpayer and the IRS a Form 1099-K if the threshhold of $2,500 is met. For 2024, the threshhold was $5,000 and it is anticipated that it will decrease to $600 starting in 2026.
Income reported on Form 1099-K could include anything from profits on sales of used clothing to resale of concert tickets. The rule does not apply to personal payments like gifts or transfers of money to friends and family. For example, if you charge a dinner with friends and they reimburse you for their share of the meal via an app like Venmo, those funds do not apply toward the reporting requirement. However, the payment in these cases should be marked as personal/non-business within the payment apps, such as Venmo and Paypal, to ensure proper reporting.
Response to Receiving Form 1099-K
It is important to respond to a Form 1099-K if you receive one. If the charges are incorrect, for example, if used clothing is sold at a loss rather than a profit, then the discrepancy can be explained to the IRS on Schedule 1 of Form 1040.
In addition, several states have different and sometimes even lower threshholds on reporting online income via Form 1099-K. Taxpayers should check with the states in which they do business for these limits.
Even if a Form 1099-K is not issued, taxpayers should be aware that the IRS requires online income or any other kind of income to be reported if it is taxable. The absence of a form does not eliminate the reporting obligation.
If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR info@accpas.com.
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