Taxpayers can avoid problems and do their taxes right by knowing what's going on and keeping everything in order. Continual learning about tax-related topics is not only helpful, but essential in an ever-changing financial environment.

Form 1099-K is a report of payments you received during the year from credit, debit, or stored-value cards, such as gift cards (payment cards), payment apps, or online marketplaces, also called third-party settlement organizations (TPSs), such as PayPal, Venmo, Etsy, Uber, and Ebay. These platforms are required to fill out Form 1099-K and send copies to the IRS and you by January 31. You may receive more than one Form 1099-K if you accept payments on different platforms.

Whether or not you receive a Form 1099-K, you still have to report any income on your tax return. This includes payments for: Goods you sell, including personal items like clothing or furniture, Services you provide, and Property you rent. Payments can be made through: Payment app, Online community marketplace, Craft or maker marketplace, Auction site, Carpool or ride-sharing platform, Ticket exchange or resale site, Crowdfunding platform, and Independent marketplace.

On November 26, 2024, Notice 2024-85 was issued, which provides guidance and clarifies that third-party settlement organizations must report transactions for goods or services where the total payments received were more than $5,000 in 2024; more than $2,500 in 2025, and more than $600 in calendar year 2026 and beyond. There are no changes to what counts as income or how tax is calculated.

Under the American Rescue Plan Act of 2021, the reporting threshold for third-party settlement organizations, which include payment apps and online marketplaces, was changed to $600. Although the IRS is gradually phasing out the Form 1099-K reporting threshold, businesses may still be able to file the form for totals exceeding $600.

You do not have to report on a Form 1099-K money you received from friends and family as a gift or reimbursement for a personal expense because these payments are not taxable income.

You may receive a Form 1099-K when you should not have received one, such as if you are reporting personal payments from family or friends as gifts or reimbursements, it does not apply to you, or it duplicates a Form 1099-K you already received. If this happens to you, contact the issuer right away and ask for a corrected Form 1099-K showing a zero amount.

Another case is that your Form 1099-K may have incorrect information such as the taxpayer identification number (TIN) or the gross payment amount. As in the previous case, contact the issuer or the Payment Settlement Entity (PSE). Do not contact the IRS as they cannot correct your Form 1099-K.

For both cases, if you cannot have a corrected Form you still have the obligation to file your taxes.

In conclusion, it can be seen that since the implementation of Form 1099-K, the impact of this Form has been significant as over the years the growth of e-commerce is increasing. In addition, it is crucial to recognize that obtaining a Form 1099-K does not innately imply the obligation to pay a defined amount of taxes. Therefore, taxpayers must actively prepare their taxes and ask for advice from experts if they do not understand how to do so.