What are 1099-Ks?

1099-Ks are issued annually by Payment Settlement Entities (PSE) and third-party settlement networks to report payment transactions taxpayers received during the year via credit cards and other contractual payments.  eBay, Venmo, Stub Hub and PayPal are some of the most recognizable of these entities that issue 1099-Ks annually to taxpayers using their services.

How have the rules changed?

Prior to the 2023 reporting year, a 1099-K was not required to be issued unless total transactions exceeded 200 and the total dollar amount exceeded $20,000 in a calendar year for the payee.  Under the new rules which begin for the 2023 reporting year, a 1099-K is required to be issued for total settlement payments from a third-party vendor that is at least $600 and no minimum number of transactions (Massachusetts had already required the $600 and no minimum number of transactions threshold prior to 2023 for payees with a Massachusetts address).

When should a 1099-K be issued?

1099-Ks should only be issued to report sales of goods or services.  Transactions between friends and family for reimbursements, personal affairs, etc. should not be reported on a 1099-K.

What to do if you receive a 1099-K?

Taxpayers that are in a business would generally report the 1099-K income on their Schedule C and deduct related costs.

Individuals who receive a 1099-K (such as for the sale of old unused furniture via eBay or the re-sale of sporting tickets via StubHub) generally should report the income and deduct the cost of the resale items on Schedule D/Form 8949.

  • For individuals, taxable income would be reported for the resale dollar amount reported on the 1099-K exceeding the cost of the underlying item.
  • For individuals, a loss from the sale of personal items is not allowed as a “taxable loss” if the resale income received and reported on the 1099-K is less than the cost of the item previously purchased.  (But the transaction reported on the 1099K would still need to be reported by individuals on their personal tax return, although a tax loss is not allowed to be claimed.)
    • When 1099-K income items are sold at a loss by individuals, taxpayers can opt to report the income and cost on Schedule 1 of the tax return – reporting the 1099-K income on Schedule 1, Part I, Line 8z with the description “Form 1099-K Personal item sold at a loss, $XXX” and report the cost, limited to income reported on the 1099-K, on Schedule 1, Part II, Line 24z with the description “Form 1099-K Personal item sold at a loss, $XXX”.