IRS answers 1099-K frequently asked questions

Good news: The IRS updated its Form 1099-K FAQ fact sheet. The Service revised guidance for two dozen of the most common queries that it receives regularly.

1099-K compliance can be one of the more aggravating tax-reporting chores for businesses as well as individuals. The more money an organization pays out or receives via payment apps or websites, as well as credit and gift cards from customers, vendors or “others,” the more work is necessary come tax time.

Make a mistake and it can be costly. If the IRS thinks you omitted a reportable payment on your return, it will retroactively charge you penalties and interest beginning on the first day it thinks you owed additional tax.

The potential fine and interest owed is just one big problem – now your future tax filings are squarely on the Service’s radar. And unless Congress puts a stop to it, up to 30,000 new tax cops will be on the beat for the IRS by the end of 2025 to investigate tax returns.

What’s the IRS advising you to do now?

Here are a few of the most common and “tricky” 1099-K questions that the IRS answers:

Do I have to report payments on my tax return if they’re not reported on a 1099-K?

“Yes. The Form 1099-K reporting threshold doesn’t affect whether payments are taxable or whether a tax return must be filed … even if you don’t get a Form 1099-K.”

What qualifies as a payment card?

“The term ‘payment card’ includes credit cards, debit cards and stored-value cards, including gift cards, as well as payment through any distinctive marks of a payment card, such as a credit card number.”

Are all the payments reported on my Form 1099-K taxable?

“Not necessarily. … [For example] [G]ifts and reimbursements for shared costs are not payments for goods or services and therefore are not reportable on a 1099-K.”

Are sales paid for with stored-value cards or gift cards considered reportable payment card transactions?

“It depends. Sales paid for with stored-value cards or gift cards are reportable if the card is accepted by a network of persons unrelated to the issuer and each other. Sales [aren’t 1099-K] reportable when the card is only accepted as payment by the issuer or someone who is related to the issuer of the card, such as a subsidiary company or the company itself.”

To access the complete and updated IRS FAQ on Form 1099-K, click here.