Tips for Avoiding Incorrect Forms 1099-K

Third-party settlement organizations such as payment apps and online marketplaces must report on Form 1099-K the gross amount of payments received for goods and services through their platform, subject to the minimum reporting thresholds. The apps shouldn’t report payments received for reimbursements or gifts.

However, it may be difficult for apps such as PayPal and Venmo, which process payments for a variety of purposes, to correctly categorize goods and services. With these apps, the most important factor for Form 1099-K reporting is whether a business or personal account is used to receive the payment.

These apps generally report on Form 1099-K any payments sent to business accounts, but don’t report payments made to personal accounts. Business owners that accept payment through one of these apps should create a separate account for personal use. Otherwise, personal payments will show up on their business's Form 1099-K.

Get more tips for reducing the chance of receiving incorrect Forms 1099-K from the National Taxpayer Advocate’s blog.