Form 1099-K, “Payment Card and Third-Party Network Transactions” is an information return that reports the gross amount of reportable transactions to the Internal Revenue Service (IRS). Payment card transactions are those transactions processed using credit cards and debit cards. Third-Party Network transactions are those transactions processed by a central organization that has a contractual obligation to make payment to participating payees of third-party network transactions, such as PayPal, Square, eBay, and StubHub.
Annually, payment card organizations and third-party networks must file Form 1099-K that reports the recipient’s name, address, taxpayer identification number and the gross amount of the reportable payment transactions with respect to the payee for the calendar year. Form 1099-K must be issued to the recipient by January 31st of the year following the close of the calendar year being reported upon. The filing organizations are also required to submit a copy of Form 1099-K to the IRS.
The 1099-K reporting requirement was initiated as part of the Housing Assistance Tax Act of 2008. Initially, organizations were only required to report transactions where the gross payments exceeded $20,000 and there were more than 200 transactions in the calendar year. However, recent changes have been enacted that have reduced the reporting threshold to $5,000 for 2024, $2,500 for 2025 and $600 for 2026 and after, regardless of the number of transactions processed.
Businesses and individual taxpayers who receive a Form 1099-K are required to report the corresponding income on their tax returns. The IRS matches the amounts reported on Form 1099-K to the taxpayer’s respective return. Should the amounts not agree, the taxpayer will receive a tax notice from the IRS requesting an explanation. With the lowered reporting thresholds now in effect, compliance with Form 1099-K reporting will impact more taxpayers each coming year.
For more information, contact Rick Gilmartin, CPA, Principal, Tronconi Segarra & Associates, at rgilmartin@tsacpa.com or 716.633.1373.
