How it works
Payment card processors and third-party networks such as PayPal, Venmo, Stripe, and marketplace platforms report gross payments received on Form 1099-K once the annual threshold is met. The threshold has changed repeatedly since the planned drop to 600 dollars; the amount in effect should be confirmed for the year in question. The form reports gross receipts before refunds, fees, and cost of goods.
Why it matters
A 1099-K that includes personal reimbursements or the full sale price of items sold at a loss overstates income unless it is reconciled on the return. The IRS matches it like any other form.
Example
An online seller receives a 1099-K for 48,000 dollars. After refunds, fees, and 31,000 dollars of inventory cost, the profit is 9,000 dollars. The return should show the reconciliation, not just the profit.
Related: Form 1099-NEC. Read more: Form 1099-K reporting.
