Here's the current state of the rules — what 1099-K is, who gets one, what changed under the One Big Beautiful Bill Act (OBBBA), and what it means for your taxes.
This is educational content, not tax advice — talk to a CPA for your specific situation.
What is a 1099-K?
Form 1099-K is an information return that third-party payment processors send to the IRS (and to you) reporting how much money flowed through your account during the year. It's filed by:
- Payment apps (Venmo, PayPal, Cash App, Zelle is excluded — see below)
- Card processors (Square, Stripe, Toast, Clover)
- Marketplaces (Etsy, eBay, StubHub, Airbnb, Uber, DoorDash)
The form reports gross payments — every dollar that came in through the platform, regardless of fees or refunds.
The threshold (the big confusion)
Here's where it gets messy. The threshold for issuing a 1099-K has been a moving target:
- Before 2022: $20,000 in gross payments and 200 transactions
- 2022 (under American Rescue Plan): Threshold was supposed to drop to $600 — but the IRS delayed it
- 2023 transition rule: $20,000 and 200 transactions still applied
- 2024 transition rule: $5,000 (no transaction requirement)
- 2025 transition rule: $2,500 (no transaction requirement)
- Under OBBBA (signed July 2025): Reverted back to $20,000 in gross payments AND 200 transactions
The current rule, as of OBBBA: a third-party payment processor only has to send you a 1099-K if both thresholds are met — $20,000 gross AND 200+ transactions in a calendar year.
This applies retroactively in some places — the IRS guidance is still being clarified for the 2025 tax year — but the direction is clear: most casual users of payment apps won't get a 1099-K under the restored thresholds.
Critical: not getting a 1099-K doesn't mean income isn't taxable
This is the most important point in this entire post.
Whether or not you receive a 1099-K, business income is taxable. The 1099-K is a reporting mechanism, not a tax determination. If you earned $5,000 selling handmade goods through Etsy, that's taxable income whether Etsy sends you a 1099-K or not.
What changed under OBBBA: the IRS gets less visibility into smaller payment processor transactions. The tax obligation itself didn't change.
What's not on a 1099-K
The 1099-K only captures third-party payment processor transactions. Things that DON'T appear:
- Zelle transactions. Zelle is specifically excluded from 1099-K reporting because it transfers funds directly between bank accounts without acting as a payment processor in the same way. (Though many banks may eventually be required to report Zelle business transactions through other mechanisms.)
- Cash payments. Always taxable, never on a 1099-K.
- Check payments. Same.
- ACH transfers between bank accounts (not through a payment app).
- Wire transfers.
If your customers pay you via Zelle, cash, or check — those payments are still business income and need to be reported. The absence of a 1099-K isn't permission to skip the income.
Personal vs. business transactions
This is the other source of confusion. Most payment apps now ask you to designate transactions as "personal" or "goods and services."
Personal transactions (splitting a dinner check, paying rent to a roommate, sending someone a birthday gift) are NOT reportable income. The 1099-K excludes them.
Business transactions (payment for products, services, sales) ARE reportable income. The 1099-K captures these.
If you regularly use Venmo or Cash App for both personal and business, make sure each transaction is marked correctly. If a personal transaction gets miscoded as business and pushes you over the threshold, you'll get a 1099-K you weren't expecting.
For business owners, the cleaner approach: use separate accounts for personal and business activity. Don't mix.
What to do if you receive a 1099-K
If a 1099-K arrives in January or February:
- Verify it's accurate. Check the gross amount reported against your actual records. Discrepancies happen.
- Reconcile to your bookkeeping. The amount should match what you've recorded as income from that processor (gross, before fees).
- Don't double-report. If you've already been recording all your income from that platform, the 1099-K doesn't add to it — it just reports what was processed.
- Send it to your CPA. It'll flow through to your tax return.
If you receive a 1099-K with a number that doesn't match your records, dispute it with the processor before tax filing. The IRS gets the same copy, so a mismatch can trigger questions.
What to do if you don't receive one
If you expected a 1099-K and didn't get one — likely because you fell below the $20k/200 transaction threshold under the OBBBA rules:
- The income is still reportable on your tax return.
- Pull the gross payment totals from your payment processor's records (Venmo, PayPal, Square all have transaction history downloads).
- Include the income on Schedule C (if self-employed) or appropriate business return.
- Your CPA will calculate the tax owed.
The IRS knows the processors exist and can ask for records if needed. Failing to report income because you didn't get a 1099-K is income misreporting, not a loophole.
1099-K vs. 1099-NEC
These are different forms for different purposes:
- 1099-K reports payments processed by third-party payment processors and marketplaces.
- 1099-NEC reports payments made directly to independent contractors (over $2,000 in 2026, up from $600 under OBBBA — see our 1099 contractor walkthrough →).
Here's the rule that confuses everyone: if you paid a contractor through a payment app (Venmo, PayPal business, etc.) or by credit card, you generally do not issue a 1099-NEC. The payment processor handles it on the 1099-K side.
If you paid the same contractor by check or ACH, you do issue a 1099-NEC.
Don't double-report.
Common 1099-K mistakes
- Assuming no 1099-K means no taxable income. Wrong — income is income regardless of reporting.
- Mixing personal and business transactions on the same payment app account. Creates messy 1099-K reconciliation.
- Double-reporting income that appears on both a 1099-K and a 1099-NEC.
- Not reconciling the 1099-K against actual bookkeeping records.
- Treating Zelle as automatically tax-exempt because it's not on a 1099-K. The income is still taxable.
Common 1099-K facts to verify with a CPA
A few details where rules are still being clarified:
- State-level 1099-K rules. Some states have lower 1099-K thresholds than federal. Massachusetts, Vermont, and a few others have historically used lower thresholds.
- Goods sold at a loss. If you sell a personal item for less than you paid for it, it may not be taxable income — but the 1099-K will still report the gross. Working with a CPA on how to report this matters.
- Hobbies vs. businesses. The IRS distinguishes between hobby income and business income; the rules for deducting expenses differ between the two.
Frequently asked questions
Only if you receive $20,000+ in business payments AND 200+ business transactions in a calendar year, under current OBBBA-restored thresholds. Personal payments (marked as such) don't count toward the threshold.
Yes, if it's business income. Zelle isn't subject to 1099-K reporting the same way as Venmo and PayPal, but the underlying income is still taxable. Track Zelle business payments and report them as income regardless of whether you receive a 1099-K.
Dispute it with the payment processor as soon as possible. The IRS gets the same copy, so any discrepancy between what's reported and what you actually received needs to be resolved before filing.
Generally no — if you paid via a third-party payment processor, the processor's 1099-K handles the reporting. You only issue 1099-NECs for contractors you paid directly by check, ACH, or wire.
Where to start
If you're not sure which of your payment app activity is business vs. personal — or you're carrying business income through accounts that aren't being tracked in your bookkeeping — that's worth cleaning up before tax season.
SoFlo360 helps small business owners reconcile payment app income and ensure 1099-Ks match the books. Spanish-friendly support is available for owners who'd rather handle financial conversations in Spanish.
Book a free consultation or learn more about our bookkeeping services.
This post is educational content, not tax advice. For your specific tax situation, consult a qualified CPA.