The amounts reported on Form 1099-K include only payments received for goods or services. The form does not include adjustments for fees, discounts, shipping or refunds. Those amounts are not “income” in the eyes of the IRS but can be deducted from the amounts reported on Form 1099-K when the tax return is filed.
Clients who use sites like Venmo and PayPal to transfer funds for personal purposes should not see those amounts reported on Form 1099-K. However, that does make it important to carefully review the information contained on the form. If the amounts reported do not match the taxpayer’s records, the taxpayer can contact the third-party provider and request a corrected form.
While it’s important for taxpayers to understand the changing law governing Form 1099-K issuance, it’s also important for them to remember that the IRS expects taxpayers to report all income regardless of whether they receive a Form 1099-K. Even if clients do not cross the applicable threshold, they are still responsible for reporting income earned through online sales and side hustles.
Sale of Personal Items
One particularly confusing area involves situations in which taxpayers sell personal items online via platforms like eBay and Poshmark. In prior years, the $20,000 threshold was high enough that most of these online sellers didn’t receive Forms 1099-K.
However, with the decreased thresholds, these taxpayers may now see sale proceeds reported on Form 1099-K. When taxpayers sell used personal goods, they’re taxed only if they sell them at a profit. Taxpayers generally determine gain or loss by subtracting the sale price from the amount they paid for the item.
Gain on the sale of items that were previously held for personal use is taxable. However, losses are not deductible. These transactions must be reported on Form 8949, Sales and Other Dispositions of Capital Assets, and Form 1040, U.S. Individual Income Tax Return, Schedule D, Capital Gains and Losses.
The IRS has directed taxpayers who sold personal items at a loss to make offsetting entries on Form 1040, Schedule 1, Additional Income and Adjustments to Income, by:
- reporting the proceeds as listed on Form 1099-K on Part I – Line 8z – Other Income, using the description “Form 1099-K Personal Item Sold at a Loss” and
- reporting their costs, up to but not more than the Form 1099-K amount, on Part II – Line 24z – Other Adjustments, using the description “Form 1099-K Personal Item Sold at a Loss.”
Conclusion
Millions of taxpayers who have never received a Form 1099-K are likely to begin receiving these forms in 2024 and subsequent years. The IRS is releasing guidance and examples on a rolling basis to help these taxpayers understand their reporting obligations — and advisors should pay close attention to the details.
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FAQs
What You Need to Know. Starting this year, earnings of $600 or more via online platforms like PayPal, Venmo and Etsy must be reported to the IRS on Form 1099-K. Legislation in 2021 dropped this threshold from $20,000. After years of delay, the change becomes effective for tax year 2024.
What are the rules for 1099-K in 2024? ›
In 2024, taxpayers using a third party will receive a 1099-K form when they receive $5,000 using a payment processor. This is part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan.
What is the new rule for 1099-K? ›
Recap of the 1099-K reporting threshold changes
Beginning Jan. 1, 2024, these thresholds will drop significantly. With the change, payment platforms (like PayPal®, Square®, Venmo, etc.) must report payments totaling $5,000 or more in a calendar year, with no transaction minimum.
What are the new 1099 rules for 2025? ›
In 2025, the IRS will require third-party payment networks to send taxpayers Form 1099-K if their transactions meet the new $5,000 threshold set by the IRS for transactions in 2024.
What is the new IRS $600 rule? ›
The reporting threshold for third party settlement organizations, which include payment apps and online marketplaces, was changed to $600 by the American Rescue Plan Act of 2021. The IRS announced a delay in implementing this change for tax year 2023, which covers tax returns generally filed in early 2024.
What are the changes in the IRS in 2024? ›
For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year. Heads of households, or unmarried taxpayers who have dependents and pay for more the half of the expenses of a household, can take a standard deduction of $21,900 in 2024, an increase of $1,100 from 2023.
How much can you sell on eBay before you get a 1099 in 2024? ›
We'll provide a Form 1099-K to you by January 31, 2024 if: 1) you received more than $20,000 and had more than 200 transactions; or 2) you did not give us your SSN, ITIN, or EIN and we withheld on your payments; or 3) your payments were subject to withholding, even if you did not have available funds to cover your ...
Does Zelle report to the IRS in 2024? ›
Zelle doesn't report to the IRS for business or personal use of its platform. Technically, it doesn't count as a third-party payment network, so the usual reporting requirements don't apply to it. In addition, personal transactions on a third-party payment network are never taxable.
What is the new law on cash deposits? ›
Banks must report cash deposits of more than $10,000 to the federal government. The deposit-reporting requirement is designed to combat money laundering and terrorism.
Do I have to report 1099-K income if I don't have a business? ›
You must report all income you receive on your tax return. This may include the gross payment amount on Form 1099-K and amounts on other reporting documents like Form 1099-NEC or Form 1099-MISC.
“So, starting with the 2025 filing season, the IRS will make Direct File a permanent option for filing federal tax returns.
What are the new changes to the 1099? ›
Starting Jan. 1, 2024, filers of 10 or more Forms 1099 must file the forms electronically and may be subject to penalties if paper forms are filed unless a waiver is requested. To file 1099 Forms electronically this year, filers must request a new IR-TCC code from the IRS, which can take up to 45 days to obtain.
What are the tax rules for 2026? ›
In 2026, this is all expected to change (again). The standard deduction for taxpayers younger than age 65, currently $14,600 (single) and $29,200 (married filing jointly), is expected to decline to $8,300 and $16,600, respectively, according to the Cato Institute.
What is the 1099-K rule for 2024? ›
What You Need to Know. Starting this year, earnings of $600 or more via online platforms like PayPal, Venmo and Etsy must be reported to the IRS on Form 1099-K. Legislation in 2021 dropped this threshold from $20,000. After years of delay, the change becomes effective for tax year 2024.
What is the 1099-K rule? ›
For 2023 taxes (2024 filing season), platforms are required to send you Form 1099-K if you had over $20,000 in payments and over 200 transactions during 2023. The bottom line: If you receive payments for goods and services in 2024 from an app or online platform, keeping your receipts is a good idea.
Do I have to report 1099-K if it is less than $20,000? ›
Not necessarily. The 2023 federal reporting threshold of over $20,000 and 200 transactions is a reporting requirement for TPSOs, but companies may still send a Form 1099-K for payments for goods or services payments that are less than that amount.
Will Zelle be taxed in 2024? ›
If you're a freelancer or gig worker who receives payments via apps like Venmo, Zelle, Cash App or PayPal, your tax reporting requirements will change for the 2024 tax year. The law will not affect the amount of taxes owed, but it will change how you report income with 1099-K forms.
What are the eligibility requirements for 1099-K? ›
For 2023 taxes (2024 filing season), platforms are required to send you Form 1099-K if you had over $20,000 in payments and over 200 transactions during 2023. The bottom line: If you receive payments for goods and services in 2024 from an app or online platform, keeping your receipts is a good idea.
Do I have to pay taxes on selling personal items in 2024? ›
Selling personal items at a gain
If an individual sold items at a gain, which means they paid less than for what they sold it, they will have to report that gain as income, and it's taxable. See IRS.gov What to do with Form 1099-K for specific instruction on how to report personal item sales.
What are the 401k rules for 2024? ›
Highlights of changes for 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000, up from $22,500.
