Got a 1099-K? Here's what it means and what to do (2026)

The 1099-K reporting threshold reverted to $20,000 in gross payments and more than 200 transactions under the One Big Beautiful Bill Act, signed into law on July 4, 2025. The previously planned drops to $5,000, $2,500, and eventually $600 are no longer happening. Here's what this means for online sellers, why the number on your 1099-K looks inflated, and exactly how to report it on your taxes.

What is a 1099-K?

A 1099-K is an IRS information return that reports the gross amount of payment transactions processed through a third-party settlement organization (TPSO). For online sellers, TPSOs include platforms like Etsy, Amazon, eBay, Poshmark, Shopify Payments, PayPal, Stripe, and Venmo.

The platform sends a copy to both you and the IRS. The IRS uses it to cross-reference what you report on your tax return. If the numbers don't match and you haven't filed a Schedule C showing your expenses, you'll receive an automated notice — typically a CP2000 — proposing additional tax on the full 1099-K amount.

The 2026 threshold: what changed and what didn't

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, retroactively reinstated the pre-2022 reporting threshold:

You must exceed both the dollar amount and the transaction count on a single platform to trigger a 1099-K. Selling one item for $25,000 doesn't trigger it (under 200 transactions). Selling 250 items totaling $12,000 doesn't trigger it (under $20,000). Both thresholds must be crossed.

Why your 1099-K amount looks too high

The 1099-K reports gross payment volume — not your profit, not your net income, and not even your actual revenue. It includes amounts that are not taxable income:

• Platform fees — the full sale price before the platform takes their commission
• Shipping charges collected from buyers
• Sales tax collected — marketplace-collected tax is often included in the gross figure
• Refunds and returns — transactions you reversed are often still included

A seller with $15,000 in gross sales, $1,500 in refunds, $2,000 in platform fees, and $1,800 in shipping collected might see a 1099-K for $15,000+ even though their actual revenue was closer to $9,700.

How to report your 1099-K: step by step

Step 1: Download your platform records

Log into each selling platform and download your annual sales summary or transaction CSV. You need total gross sales, total fees paid to the platform, total shipping costs, total refunds, and COGS (cost of goods sold) records.

Step 2: Complete Schedule C (Form 1040)

• Line 1 (Gross receipts): Enter the 1099-K amount. This must match what the IRS received.
• Line 2 (Returns and allowances): Enter refunds, cancelled orders, and sales tax you collected and remitted (if included in your 1099-K gross).
• Line 4 (Cost of goods sold): Enter your total COGS — inventory costs, materials, inbound shipping. Complete Part III of Schedule C.
• Lines 8–27 (Expenses): Platform fees, outbound shipping, home office, internet, phone, supplies, software, advertising.
• Line 31 (Net profit or loss): This is your actual taxable income — often dramatically lower than the 1099-K amount.

Step 3: Calculate self-employment tax (Schedule SE)

Your net profit flows to Schedule SE. Self-employment tax for 2026 is 15.3% on 92.35% of net profit (up to the $184,500 Social Security wage base). You can deduct half of your SE tax as an above-the-line adjustment on your 1040. See our complete SE tax breakdown.

Step 4: File using tax software or a CPA

TurboTax Self-Employed, H&R Block Self-Employed, and FreeTaxUSA all handle 1099-K and Schedule C well. If your situation is complex — multiple platforms, high inventory, international sourcing — a CPA who understands e-commerce is worth the investment.

What if you sold personal items at a loss?

If you received a 1099-K for selling personal items — cleaning out your closet, selling an old laptop — and you sold them for less than you originally paid, you do not owe tax on those transactions.

Report the income on Schedule C (or Schedule 1 for occasional sales) and show your original cost as your basis. If you sold a phone for $200 that you bought for $800, you have a $600 loss on that item — not $200 of income. The IRS cannot tax you on selling personal property at a loss.

What if you didn't receive a 1099-K?

The $20,000/200-transaction threshold is a reporting threshold — not a tax threshold. Even if you earned $10,000 selling on eBay and didn't get a 1099-K, that income is still taxable and must be reported. Some platforms voluntarily issue 1099-Ks below the federal threshold, and many states maintain their own lower thresholds (some as low as $600).

Common 1099-K mistakes to avoid

• Ignoring the form. The IRS has a copy. Not reporting it guarantees an automated notice.
• Reporting only net income. Always report the gross 1099-K amount on Line 1 of Schedule C, then deduct expenses separately.
• Not deducting platform fees. The 1099-K includes revenue before fees. Those fees are your deduction — often 10–20% of gross sales.
• Forgetting COGS. Inventory costs are typically the largest deduction and the most commonly missed.
• Double-reporting across platforms. If you use PayPal or Stripe across multiple platforms, make sure you're not counting the same sale twice.

1099-K vs. 1099-NEC

A 1099-K reports payments processed through a third-party network. A 1099-NEC reports direct payments from a client. If a client pays you via PayPal, the platform issues a 1099-K. If they pay via check, you'd get a 1099-NEC. You should not receive both for the same income.