Form 1099-K FAQs: Common situations

A1. If the payment through a payment app is not for selling goods or providing services, your child should not receive a Form 1099-K. Form 1099-K is used to report certain payments received for selling goods or providing services. Money sent through a payment app between family and friends that is not payments for goods or services should not be reported on a Form 1099-K.

A2. If your child or dependent provided services for others and was paid through a payment app or sold items through an online marketplace and received a Form 1099-K, your child or dependent may need to file a tax return. Use the form along with other records to help them figure and report the correct taxable income when they file the appropriate tax return.

A3. Payments made to friends and family for gifts and reimbursements should not be reported on a Form 1099-K. 

For example, if you and your friend go to a concert, and your friend reimburses you for the concert ticket through a payment app, you should not receive a Form 1099-K for the reimbursement and, generally, it would not be taxable. If you get a Form 1099-K for the reimbursement, you likely will not need to pay taxes on the amount reported on the form. For more information see, If you receive a Form 1099-K when you shouldn't have, take these steps.

A4. You must report the gain and loss on the sale of the two sets of tickets separately because the loss on the sale of the second set of tickets cannot offset the gain on the sale of the first set of tickets.

The $550 gain from the sale of one set of tickets ($800 sales price - $250 purchase price = $550 gain) must be reported as short-term gain on Form 8949 PDF and Schedule D PDF.

The $50 loss from the sale of the other set of tickets ($200 sales price - $250 purchase price = $50 loss) should be reported as follows:

Form 1040, Schedule 1:

Part I – Line 8z, Other Income. List type and amount: “Form 1099-K Personal Item Sold at a Loss…. $200” to show the proceeds from the sale reported on the Form 1099-K

and

Part II – Line 24z, Other Adjustments. List type and amount: “Form 1099-K Personal Item Sold at a Loss…. $200” to show the amount of the purchase price that offsets the reported proceeds.

A5. If you accept payment cards (for example, credit cards or debit cards), you will receive a Form 1099-K for the gross payment amounts sent to you through the use of a payment card during the calendar year, no matter how much the total. This reporting requirement for payment cards has not changed, and there is no minimum reporting threshold for these types of payment transactions.

If you accept payments using payment apps or online marketplaces, you may receive a Form 1099-K from the apps or marketplaces you used for the sales of goods or services.

A6. You may report offsetting entries on Schedule 1, lines 8z and 24z for each Form 1099-K you received separately, or you may combine the Forms 1099-K received as follows:

• One combined set of offsetting entries on Schedule 1 for all Forms 1099-K received reporting sales of personal items sold at a loss. Report the combined total of the proceeds on Schedule 1 – Line 8z – Other Income, using the description “Forms 1099-K Personal Items Sold at a Loss.” Report the combined cost of the items, up to but not more than the proceeds of each item sold, on Line 24z – Other Adjustments, using the description "Forms 1099-K Personal Items Sold at a Loss."
• One combined set of offsetting entries on Schedule 1 for all Forms 1099-K received in error. Report the combined amounts from Line 1a, Gross amount of payment card/third party network transactions, for the Forms 1099-K received in error on Schedule 1 – Line 8z – Other Income, using the description “Forms 1099-K Received in Error.” Report the same amount reported on Line 8z on Line 24z – Other Adjustments, using the description "Forms 1099-K Received in Error."

A7. Yes. For calendar years 2022 and 2023 you may use Schedule 1, line 8z to show both the gross proceeds and the offsetting negative amount to report a Form 1099-K received in error or to report proceeds from the sale of a personal item at a loss as an alternative to reporting only gross proceeds on Schedule 1, line 8z with offsetting amounts on Schedule 1, line 24z.

For background: When reporting sales of personal items at a loss you may instead report the transaction(s) on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D, Capital Gains and Losses.

A8. You should use your records to determine the amount of personal payments (such as gifts or reimbursements from friends and family) and the amount of payments that need to be reported on your tax return. If you receive an erroneous Form 1099-K, follow the instructions for if you can't get a corrected Form 1099-K.

Good recordkeeping throughout the year is key. It’s a good idea to keep business and personal transactions separate to make it easier to figure out what tax is owed.

A9. You may receive a Form 1099-K for money raised through crowdfunding. Some money raised through crowdfunding may be taxable to you, and you may be required to report it on your income tax return. However, some money raised may be considered a gift and would not be taxable.

See IRS.gov Some things to know about crowdfunding and taxes for more information and how to report the Form 1099-K amount on your tax return for your situation.