Form 1099-K – Payment Card and Third-Party Network Transactions

This article explains Form 1099-K using only official guidance from the Internal Revenue Service (IRS). It is designed for U.S. small businesses, online sellers, accountants, and platforms that process payments for goods and services.

Purpose of Form 1099-K

Form 1099-K is an information return used to report payments for goods and services that were processed through payment cards or through certain online or third-party payment networks. The form is issued both to the payee and to the IRS. Its main purpose is to help the IRS match income reported on tax returns with payments that were actually processed.

Who files the form?

In most cases, the business or individual who received the money does not file Form 1099-K. The filing obligation lies with the organization that processed or settled the payment. The IRS calls this organization a Payment Settlement Entity (PSE).

Payment Settlement Entity (PSE)

A PSE is responsible for filing Form 1099-K when reportable payment transactions occur. There are two main types:

• Merchant acquiring entities – card processors or financial institutions that have a contractual relationship with merchants to process payment card transactions (for example, processors handling Visa or Mastercard payments for a store). When these transactions are settled, the processor must report them.
• Third-party settlement organizations (TPSOs) – platforms or networks that accept payments from multiple buyers and pass the money on to sellers. When certain conditions are met, they must report the payments.

What is a TPSO?

A Third-Party Settlement Organization (TPSO) is an organization that:

• has agreements with both buyers and sellers,
• operates a network or platform through which payments are made, and
• makes the final payment to the seller.

When total payments for goods and services through a TPSO exceed the IRS reporting threshold for the year, that organization must issue Form 1099-K to the payee.

Reporting thresholds (IRS transition relief)

Congress reduced the statutory threshold for third-party network transactions to $600, but the IRS is phasing this in gradually. Under current IRS guidance:

• For calendar year 2024, a TPSO must file Form 1099-K if payments for goods and services to a payee exceed $5,000.
• A lower amount is expected to apply in 2025, and the full $600 threshold will apply in subsequent years.

For payment card transactions, there is no minimum amount — card payments are reportable whenever they occur.

What Form 1099-K shows

The form reports the gross amount of reportable payment transactions for the calendar year. “Gross” means the total before any fees, refunds, or chargebacks. This figure can also include shipping or handling that went through the platform. A monthly breakdown of totals is often included.

Because it shows gross receipts, the amount on the form is often higher than the figure that will appear as taxable income once business expenses are deducted.

How taxpayers should use the form

Form 1099-K is an informational document — it does not replace your own records. To use it correctly:

1. Review the form: confirm your name, address, and Taxpayer Identification Number (TIN).
2. Compare totals: match the reported amount with your bookkeeping and bank deposits.
3. Identify personal payments: if personal or non-business transfers were marked as “goods and services,” they may appear on the form but are not taxable.
4. Report the correct income: include the appropriate amount on your tax return, such as on Schedule C if you are self-employed.

You must report all taxable income from sales or services even if you did not receive a Form 1099-K.

Where and how the form is filed

The entity that processes the payments — either a PSE or TPSO — files Form 1099-K with the IRS. There are two filing options:

• Paper filing: submitted to the IRS together with Form 1096 (Annual Summary and Transmittal of U.S. Information Returns).
• Electronic filing: completed through the IRS FIRE System (Filing Information Returns Electronically). Many organizations are required to e-file when submitting multiple information returns.

Filing deadlines:

• Copy to the payee: January 31
• Filing with the IRS: February 28 (paper) or March 31 (electronic)

If the form is incorrect

If the information on Form 1099-K does not reflect actual business activity, review it carefully. Common issues include:

• personal transfers reported as business transactions,
• an incorrect TIN or name, or
• duplicate reporting by multiple platforms.

Contact the payment platform or processor that issued the form to request a corrected version. Keep supporting documentation such as invoices, exports from the platform, and bank statements.

Why this matters now

As the IRS lowers the TPSO reporting threshold, more individuals and small businesses will begin receiving Form 1099-K — even for modest online sales. Accountants should remind clients that:

• a Form 1099-K shows gross receipts, not profit,
• records of refunds, fees, and returns should be retained, and
• selling personal items at a loss is generally not taxable, but such sales can still appear on the form.

Official IRS references

• About Form 1099-K
• Instructions for Form 1099-K (Rev. March 2024)
• Understanding Your Form 1099-K
• What to Do with Form 1099-K
• Transition Relief for TPSOs
• Form 1099-K FAQs – General Information
• IRS – FIRE System