If you received a Form 1099-K in the mail or online, you may be wondering what it is and whether it means you owe taxes.
A 1099-K is a tax form that reports certain payments you received for goods or services through credit cards, payment apps, or online marketplaces. The company that sends the form also reports the information to the IRS.
Getting a 1099-K does not automatically mean that the entire amount shown on the form is taxable. What matters is why you received the money.
Why Did I Receive a 1099-K?
You may receive a 1099-K because you accepted payments for goods or services through a payment app, online marketplace, credit card processor, or another payment platform.
For example, you might receive payments from:
- A side business
- Freelance work
- Selling products online
- Rideshare or delivery work
- An online marketplace
- Customers paying by credit or debit card
The form shows the gross amount of certain payments processed for you during the year. This means the number on the form may be higher than the amount you actually kept after expenses, fees, refunds, or other adjustments.
Does Receiving a 1099-K Mean I Owe Taxes?
Not necessarily. A 1099-K reports payments. It does not determine how much tax you owe.
For example, if you run a small business and receive payments from customers, some of that money may be business income. You may also have legitimate business expenses that need to be considered when preparing your tax return.
If you sold a personal item, the tax treatment can depend on whether you sold it for more or less than you originally paid for it.
The important thing is to keep records showing where the money came from and what it was for.
What About Money From Friends and Family?
Personal payments generally should not be reported on a 1099-K just because someone sent you money through a payment app.
For example, a friend paying you back for dinner, a roommate sending you their part of the rent, or a family member sending you a birthday gift is different from receiving money for selling something or providing a service.
If you receive a 1099-K that includes payments you believe should not have been reported, don’t simply ignore the form. The information may also have been sent to the IRS, so it is important to determine how the situation should be handled.
What Should I Do With My 1099-K?
Keep your 1099-K with your other tax documents. Compare the amount on the form with your own records. Look at your sales, business income, receipts, fees, refunds, expenses, and other information related to those payments.
If something on the form appears incorrect, you may need to contact the company that issued it.
Most importantly, don’t assume that the number shown on your 1099-K is automatically the amount you will pay taxes on. Your actual tax situation depends on what the payments were for and your other tax information.
Local Tax Can Help With Your 1099-K
1099-K forms can be confusing, especially if you have a side job, sell products online, work for yourself, or receive payments from several different apps and websites.
Local Tax can help you understand your 1099-K and determine how the payments should be handled on your tax return.
We can review your 1099-K along with your other tax documents, help you understand your income and expenses, and prepare your tax return correctly.
If you received a 1099-K and aren’t sure what to do with it, bring it with you when you prepare your taxes.
Local Tax
9429 Somerset Blvd
Bellflower, CA 90706
(562) 925-2203
Contact Local Tax if you need help understanding a 1099-K or preparing your tax return.
