So you receive a 1099-K tax form this year. Here’s what to know.
So you receive a 1099-K tax form this year. Here’s what to know.
Self-employed people who send and receive payments using things like PayPal, Venmo and CashApp get a special tax form, called a 1099-K. Usually though, they’d only receive one if they made at least $20,000. Now, the threshold has been lowered to just $5,000. That means that a lot more people could find a 1099-K form in their mailbox — even if they’re not self employed.
Mark Steber is senior vice president and chief tax information officer at Jackson Hewitt Tax Service. He recently spoke with “Marketplace Morning Report” host David Brancaccio. The following is an edited transcript of their conversation.
David Brancaccio: If a person does contract work for pay, you’ve always had to report your income at tax time. But what is this the 1099-K. I have not seen that one before.
Mark Steber: The 1099-K has been around for a long time, and it was used primarily for payments made through any third-party app like Venmo or PayPal. The reason you hadn’t heard about it was because, until this year, the threshold was pretty high for when one of those third-party platforms had to send a 1099-K to both the recipient of the monies and to the IRS.
Brancaccio: All right, we’re gonna clear this up. What is it for this tax year that we’re concerned about, which is 2024? It’s like $5,000 right?
Steber: It is $5,000. They’ve considered it a transition year, so they’ve gone from $20,000 last year, to tax year ’24 — the year you’ll be doing your taxes here in a few weeks — to $5,000. Now for tax year ’26, the threshold is $600. And to be clear, those are locked in stone as the rule. So if you got PayPal money or Venmo money over $5,000, then you might get a 1099-K. Now, that’s per platform, so if you use multiple platforms, you don’t add them all together. It’s $5,000 on that platform.
Brancaccio: But not Zelle. There’s is a Zelle exemption?
Steber: Well, Zelle does not consider themselves a third-party platform. And whether you get one or don’t get one, or whether you’re doing side-hustle business and getting paid this way, it’s always been taxable.
Brancaccio: What if you’re selling an old sofa, an old lampshade, and it does accumulate, and it is more than $5,000? Could you get one of these for just selling stuff?
Steber: Absolutely. There’s no rule, because it’s, you know, a hobby or a side gig or part-time. If you’re getting paid, unfortunately, it’s a taxable gain — even if it’s $1.
Brancaccio: What about if my rich Aunt Sally sends me $400 on PayPal to get me through the month? How about that situation?
Steber: You know, if you’ve got a gift or a payment, those are completely not taxable, and furthermore, you should not get that on a 1099-K. That being said, if you didn’t fill out the platform activity correctly, and you didn’t put “personal payment,” and they send you a 1099-K you can either get an amended 1099 by asking the platform. Or the IRS in their infinite wisdom have figured out how to put it on your tax return on a line and back it off on another line. But you can’t ignore it if you get one, because the IRS has it too, and they may not have all the facts and knowledge that you have.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
