Starting in January of 2025 payment cards (credit and debit cards) and E-commerce platforms like PayPal, Venmo, Amazon Pay, and other payment processors will be required to issue IRS form 1099-K, officially titled “Payment Card and Third-Party Network Transactions,” for taxpayers who received $5,000 in payments for goods, services, or rent for business transactions in 2024.  Personal payments from family and friends are not payments for goods or services and should not be reported.

Form 1099-K is issued to individuals and businesses that meet the following criteria:

• Payment card transactions: Credit/debit card transactions totaling over $600 in aggregate within the tax year (effective for tax year 2023 and beyond)
• Third-party payment networks: More than $5,000 in business transactions during calendar year 2024. For 2025, the threshold will drop to $2,500 and for 2026 and after it will be $600. This is a significant change from the prior threshold of more than $20,000 in gross payment volume and more than 200 transactions in a calendar year.
• Zelle does not issue 1099-K because it directly transfers money between bank accounts without holding funds, unlike other payment platforms.

How to Use Form 1099-K for Tax Filing

If you receive Form 1099-K, you must include the reported income on your tax return. For most businesses, this will be reported as gross income on:

• Schedule C (Form 1040) for sole proprietors.
• Partnership, corporate, or other applicable tax returns for entities.

If you believe the form includes errors or non-taxable transactions, consult with us for assistance in resolving the issue with the payment processor.

These requirements stems from the American Rescue Plan Act of 2021, which expanded the 1099-K reporting requirements to include taxpayers who receive over $600 in gross payments. Nevertheless, the IRS delayed the implementation several times, only establishing the $5,000 threshold for 2025. While lawmakers from both parties aim to raise this threshold to avoid taxpayer confusion, efforts to do so have stalled.

Businesses must maintain accurate records of all payments received, and should not depend on form 1099-K.  It is essential that proper amounts are included in income, because Form 1099-K may include nontaxable items if the issuing platforms are basing the reporting on incomplete or inaccurate information and may not account for refunds.  The amount on 1099-K may differ from your actual net income.

The 1099-K forms must be issued by January 31 of the year following the tax year in which the transactions occurred. For example, for transactions in 2024, the form must be sent to recipients by January 31, 2025. The form will also be filed with the IRS by the same deadline.

Please be sure to send us copies of all 1099-K with your tax data.

If you have any questions please don’t hesitate to reach out to us.