1099-K reporting tax return

How to Report 1099-K on Income Tax Return

It’s not uncommon for online sellers to receive a 1099-K, Payment Card and Third Party Network Transactions, for the prior year. It is one of several information returns that should be obtained before your tax return is prepared.

The IRS requires that a marketplace facilitator, such as Amazon, eBay and Walmart send online sellers a 1099-K if they have enough reportable transactions. The current threshold for a 1099-K to be sent to online sellers (and the IRS) is more than $20,000 and 200 transactions in a year.

NOTE: The American Rescue Plan Act is set to lower the payment threshold to $600 starting in 2022.

At a minimum you should report the 1099-K amount on your tax return as gross receipts. This amount is not the amount you pay tax on because related expenses should be factored in to determine how much tax, if any, is due.

If your business is a sole proprietor your 1099-K amount should be shown on Part 1, Line 1 or line 1a of your corporate return if your business is incorporated.

1099-K Reporting to States

If you had transactions on Amazon, eBay, Walmart or some other marketplace and did not receive a 1099-K you should still report those sales on your tax return. This is especially true if you live in states like Maryland, Massachusetts, Vermont and Virginia which have thresholds that are lower than that of the IRS. Marketplace facilitators will typically send online sellers located in these states a 1099-K if $600 or more was paid, regardless of the number of transactions. In Missouri the threshold is $1,200 while Illinois requires 1099-K reporting is met at $1,000 and a minimum of 3 transactions.

The lower thresholds have resulted in not only online sellers receiving 1099-Ks but also those with transactions on crowdfunding platforms like Kickstarter.

States are known to change their tax requirements so it’s best to play it safe and report all your sales even if you should have received a 1099-K and did not.

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