1099-K Form: What Freelancers and Businesses Need to Know

A 1099-K is a form used to report payments from payment cards, such as debit, credit, or gift cards, or third-party online apps like PayPal or Stripe. This form is often crucial for small businesses and freelancers in the USA who receive income through these apps, as it allows them to maintain accurate income reports for tax purposes.

That said, simply receiving payment once from these apps does not mean you will automatically be issued a 1099-K. These are often sent out by payment settlement entities to businesses and individuals who meet a certain threshold. In this article, we’ll discuss everything you need to know about 1099-K forms and some common mistakes to avoid when filing it.

Let’s jump in!

Key Takeaways

• A 1099-K is an official record of a transaction made on an online platform and can include details about the payer, the recipient, and the transaction amount.
• Individuals and businesses that receive more than $2,500 in payments on a payment app in 2025 must file a 1099-K form.
• The main difference between a 1099-K and a 1099-MISC or 1099-NEC is that the former is sent out by payment settlement entities, while the latter is issued by the individual or business that made the payment.
• Common 1099-K filing mistakes include stating the wrong gross amount, not staying updated with the reporting thresholds, and failing to double-check the information.

What Is a 1099-K Form?

A 1099-K form, or the Payment Card and Third-Party Network Transactions form, is an IRS document used to report specific payment transactions received through third-party payment forms and credit or debit card transactions.

This is commonly seen among small businesses in the U.S. that use marketplace platforms and payment processors. That said, the occupations in the gig economy also use 1099-K to record payments received from platforms like PayPal or Stripe.

Freelancers and small business owners who meet the income threshold for 1099-K will receive the form from the respective platform they use for payments. Don’t worry; receiving a 1099-K won’t affect freelance taxes or other tax types since it is merely a record of your financial transactions.

1099-K Form Reporting Thresholds

The 1099-K reporting threshold for 2025 in the US is $2,500. This means that if you earn payments totaling to or exceeding this amount, you will receive a 1099-K form.

Here is a quick overview of the 1099-K threshold changes throughout the years:

• 2023. In 2023, 1099-K forms were issued to businesses and freelancers who earned more than the $20,000 threshold and had more than 200 transactions.

• Early 2024. This amount was reduced to $600 in 2024 by the American Rescue Plan Act of 2021 and no longer included the number of transactions.

• 2024. The income threshold was further revised in Notice 2024-85 and now requires third-party settlement entities to issue 1099-K forms to businesses that earn more than $5,000.

• 2026. In accordance with Notice 2024-85, the income threshold for 2026 and the years beyond is set at $600.

That said, while the income threshold has changed, the 1099-K tax rate stays the same. The 1099-K tax implications don’t change since it records your gross income rather than your net pay.

Moreover, since the new reporting thresholds do not consider the number of transactions anymore, this means that even a single transaction exceeding $2,500 would qualify for a 1099-K. So, if you sell a product on eBay for more than $2,500, you will likely receive a 1099-K form from that platform.

What Information Is Included in the 1099-K Form?

The information in a 1099-K form usually includes the full names of the payer and the payee, along with the transaction amount, to ensure an accurate transaction record for both parties.

Let’s discuss these further:

• Payer’s information. A 1099-K should include information about the payer or the entity that issued the form. In this case, it could be PayPal, DoorDash, or an online platform like eBay.

• Recipient’s data. Refers to the name, address, and Taxpayer Identification Number (TIN) of the recipient in the form and ensures that payment is credited to the right person.

• Gross transaction amount. This is the total amount of payments received throughout the year.

Since a 1099-K form is an official document used to report income, it’s important that all the details in it are accurate. Any errors in the gross payment amount or the recipient’s TIN can lead to incorrect data during the 1099-K filing and can be a red flag for the IRS. This can trigger a payroll reconciliation and the corresponding penalty.

So, before issuing a 1099-K form, make sure to double-check all the details provided. Meanwhile, if you are a freelancer who received a 1099-K, consider cross-referencing the amount stated on the form with your invoice. If you find any discrepancies, contact your payment settlement entity right away.

Who Needs to File a 1099-K Form?

Payment apps and other third-party platforms in the U.S. will need to file a 1099-K form for every individual who exceeds the reporting threshold. They would also have to send a copy of this form to the respective individual. Once you receive the form, you are required to report 1099-K on your tax returns.

Here’s where you can report it depending on your classification:

• Sole proprietor. Sole proprietors must report their Form 1099-K payments on Form 1040 Schedule C.
• Partnership. Those in a partnership, on the other hand, can use Form 1040 Schedule E to report their Form 1099-K payment.
• Corporation. Corporations can use either Form 1120 or Form 1120-S to report their Form 1099-K.

How to File a 1099-K Form

To file a 1099-K form in the U.S., you first need to create the document using a generator like Paystub.org and provide a copy to the IRS and to the individual who meets the 1099-K requirement of exceeding the $2,500 reporting threshold.

Here’s a step-by-step instruction for 1099-K filing:

1. Fill out the 1099-K form detailing the recipient’s name, address, telephone number, and account number.
2. Next, add their TIN and confirm that the details are correct.
3. Then, you can add your (payee) information, including your name, address, and telephone number.
4. Check the appropriate transaction boxes; this can either be payment card transactions or third-party network transactions.
5. Next, enter the total number of transactions made and the gross amount of payment provided.
6. Fill out the other details that apply, such as federal income tax, state information, and the merchant category code.
7. When done, you can file your 1099-K with the IRS and send out a copy to the concerned individual.

1099-K Form vs. 1099-MISC vs. 1099-NEC

The main 1099-K vs. 1099-MISC vs. 1099-NEC difference lies in the document’s sender and the type of payment received.

Here’s a closer look at each form:

• 1099-K. As previously mentioned, the 1099-K tax form records income processed through payment apps or card transactions and is issued by a third-party organization for transactions that exceed $2,500.

• 1099-MISC. 1099-MISC forms are issued by businesses or individuals to report miscellaneous payments, such as rent, awards, or prizes amounting to $600.

• 1099-NEC. A 1099-NEC form records compensation provided to non-employees, such as independent contractors or freelancers, exceeding $600. This is often issued by the individual or business that hired the contractor.

3 Common Mistakes and Issues to Avoid with 1099-K Filing

While filing 1099-Ks is quite straightforward, there are still some common mistakes you may overlook that could lead to severe penalties, such as:

• Not staying updated with threshold changes. The reporting threshold for 1099-K filing can change, as evidenced by the two revisions it received in 2024, so it’s crucial to stay updated to ensure you don’t overlook filing requirements.

• Stating the wrong amount. Errors in the amount stated in the 1099-K tax form are common, especially among first-timers. This issue is often caused by confusion in the amount reported—the form should state the gross income and not the net pay.

• Failing to double-check information. As mentioned earlier, having accurate and up-to-date information on your 1099-K form is crucial. So, before filing your form, make sure to double-check your details and the payee’s information to ensure a smooth process.

Instantly Create Professional 1099-K Forms With Paystub.org

If you need to issue 1099-K forms, Paystub.org’s 1099-K generator can help you create professional documents in seconds! With our tool, you can ensure accuracy with online income reporting and keep organized records of all financial documents.

You’ll also find some 1099-K form examples on our site, so even if it’s your first time creating the form, you’ll have a document to reference. We also offer 1099 and W-2 form generators that you can use to simplify your filing process.

Final Thoughts

1099-K forms are essential for accurate independent contractor tax filings, as they record the payments received from card transactions and payment apps. This is why it’s important to provide professional 1099-Ks promptly to help contractors and small business owners stay compliant with IRS regulations.

To streamline this process, you can use Paystub.org’s 1099-K generator to create the necessary forms in seconds. Our tool utilizes standardized templates to help you save time and reduce errors when creating 1099-Ks.

1099-K Form FAQ

#1. Do I need to file a 1099-K if I didn’t earn the threshold amount?

No, you don’t need to file a 1099-K if you didn’t earn the threshold amount. That said, you would still need to report your income and file taxes regardless of how much you earned for the year.

#2. How do I report my 1099-K income on my tax return?

You can report 1099-K income on your tax return on Form 1040 Schedule C for sole proprietors, Form 1040 Schedule E for partnerships, and Form 1120 or Form 1120-S for corporations.

#3. What happens if I don't receive a 1099-K but meet the thresholds?

If you don’t receive a 1099-K but meet the thresholds, simply file your tax return as usual, including the amount you received on the online platform. 1099-K filing is only required among payment settlement entities.