❓I Got a 1099-K: Now What?

Form 1099-K applies to business transactions, not personal ones. CommerceNavigator has a built-in Schedule C Worksheet and helps you separate business and personal transactions. Start for free now.

Beginning January 1, 2023, the IRS is changing the threshold for third-party payment processors, such as Amazon, Venmo, eBay, and PayPal, to issue 1099-K forms. This means if you had more than $600 in gross sales from your online business, you'd receive the form. But there’s more to the story. Here’s what you should know about the 1099-K form and the right steps to take.

What Is a 1099-K Tax Form?

1099-K is an IRS form that reports third-party network payments and credit/debit card transactions. Before 2022, the minimum transaction threshold was $20,000 and 200 transactions. From 2023 and beyond, it has been reduced to $600, regardless of the number of transactions.

For example, most of your customers on Amazon or eBay use credit/debit cards or an account number associated with a payment card to pay. You’ll receive the 1099-K form at the end of the year because your earnings from these third-party networks exceeded $600. The number of transactions doesn’t matter.

This applies to business transactions only. It doesn’t include personal income like the money your friend sent to cover dinner. This is why separating business and personal transactions from the onset is important. Learn how to do that here.

When Will You Get a 1099-K?

As recipient copies are due by January 31, you should expect to get a 1099-K form around late January or no later than early February. Reach out to your payment processor if you haven't received the form.

What to Do When You Get a 1099-K Form?

If you get a form 1099-K, it generally contains the gross amount of reportable payment transactions from a third-party payment processor. Each processor reporting the payments you’ve received will send you a separate 1099-K form if you meet the reporting threshold for the tax year.

The gross amount shown on your 1099-K often excludes any adjustments for credits, cash equivalents, discounts, fees, refunded sums, or other amounts. Let’s go over some boxes in the form:

Gross Payments

You’ll need to calculate your gross payments during the tax season. To do this, use the reported amount of income and any sums received in cash, checks, and credit/debit card payments.

Card Not Present Transactions

This box shows transactions made with a credit card when the card wasn't physically present, such as payments made over the phone or online. Box 1a and 1b will usually be the same.

Merchant Category Code

This describes the industry where the revenue is generated in. Although you don't need to do anything, ensure it matches the NAICS code for your Schedule C.

Number of Payment Transactions

This shows the number of transactions during the year. It was more relevant when the 1099-K required at least 200 transactions.

Payment Settlement Entity (PSE) Name and Telephone Number

If there’s an error on your 1099-K, such as an information error, shared credit card terminal, entity change, and cashback payments, you should call this number to fix the mistake. The most common mistake happens when a personal account is used for business. But you don’t need to call your PSE for this. You can sort this out easily using a bookkeeping software like CommerceNavigator.

Enter Commerce Navigator

It’s important to always report accurate business income to the IRS – whether or not you get the 1099-K. If your personal and business finances are blended, CommerceNavigator can help you separate your business income so you report the correct gross amount. Preparing taxes no longer has to be burdensome, especially with the built-in Schedule C Worksheet. Now, you can prepare your taxes in a jiffy. Learn how it works here.