IRS 1099-K FAQs
These updated FAQs were released to the public in Fact Sheet 2023-06, March 22, 2023.
What's New
On December 23, 2022, the IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of more than $600 that was to go into effect for information returns due in 2023. See Notice 2023-10. Pursuant to Notice 2023-10, for calendar year 2022, third party settlement organizations who issue Forms 1099-K, Payment Card and Third Party Network Transactions, are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions.
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Why am I receiving a Form 1099-K, from a payment card or third party settlement organization? (updated December 28, 2022)
A. Third party information reporting for certain income is required by law. Third party information reporting has been shown to increase voluntary tax compliance, improve tax collections and assessments within the IRS, and thereby reduce the tax gap.
How is the IRS planning to address the changes to the Form 1099-K reporting requirements? (updated December 28, 2022)
A. As outlined in Notice 2023-10, the IRS is delaying the implementation of the requirement for third party business reporting more than $600 threshold for the 2022 calendar year.
More specifically, the IRS is delaying the implementation of the provision of the American Rescue Plan Act of 2021 that:
- Lowered the threshold for reporting third party network transactions from aggregate payments exceeding $20,000 to aggregate payments exceeding $600 during the calendar year.
- Eliminated the 200 transaction threshold for reporting third party network transactions entirely.
Is the gain or loss on the sale of a personal item used to compute my taxable income? Is that reported on a Form 1099-K? (updated March 22, 2023)
A. Gain or loss on the sale of a personal item is generally the difference between the amount you paid for the item (the purchase price) and the amount you receive when you sell it (the sales price).
For example, if you bought a refrigerator for $1,000 (the purchase price) and sold it for $600 (the sales price), you have a loss of $400. $600 sales price - $1,000 purchase price = ($400) loss amount.
On the other hand, if you bought concert tickets for $500 (the purchase price) and sold them for $900 (the sales price), you have a gain of $400. $900 sales price - $500 purchase price = $400 gain amount.
- gain on the sale of a personal item is taxable. You must report the transaction (gain on sale) on Form 8949, Sales and Other Dispositions of Capital AssetsPDF, and Form 1040, U.S. Individual Income Tax Return, Schedule D, Capital Gains and LossesPDF. See Publication 551, Basis of AssetsPDF, for guidance in determining your basis.
The gain on the sale of a personal item might be reported on a Form 1099-K.
The loss on the sale of a personal item is not deductible. For calendar year 2022 tax returns, if you receive a Form 1099-K, for the sale of a personal item that resulted in a loss, you should make offsetting entries on Form 1040, U.S. Individual Income Tax Return, Schedule 1, Additional Income and Adjustments to Income, as follows:
Report your proceeds (the Form 1099-K amount) on Part I – Line 8z – Other Income, using the description "Form 1099-K Personal Item Sold at a Loss."
Report your costs, up to but not more than the proceeds amount (the Form 1099-K amount), on Part II – Line 24z – Other Adjustments, using the description "Form 1099-K Personal Item Sold at a Loss."
In the example of the refrigerator sale above, if you received a Form 1099-K for $600 for the refrigerator for which you originally paid $1,000, you should report the loss transaction 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 …. $600" to show the proceeds from the sale reported on the Form 1099-K
and,
Form 1040, Schedule 1, Part II – Line 24z, Other Adjustments. List type and amount: "Form 1099-K Personal Item Sold at a Loss…. $600" to show the amount of the purchase price that offsets the reported proceeds. Do not report the $1,000 you paid for the refrigerator because the loss on the sale of a personal item is not deductible.
You can use Form 8949 and Schedule D to report the sale of a personal item at a loss instead of Schedule 1 if you wish, for example, because you have other transactions that require you to file Form 8949 and Schedule D anyway. Because the loss isn't deductible, enter an adjustment when reporting the proceeds and basis of the personal item on Form 8949 as follows. Enter “L” in column (f) as the code explaining the loss is nondeductible. Then enter the amount of the nondeductible loss as a positive number in column (g). In the example of the refrigerator sale above, enter $600 in column (d) for the proceeds, $1,000 in column (e) for the cost or other basis, “L” in column (f), and $400 in column (g) as the amount of the adjustment. This will result in $0 as the gain or loss in column (h).
To make sure that I report properly on the Form 8949, how do I determine if the capital gain on the sale of my personal item is short-term or long-term? (added December 28, 2022)
A. Generally, if you hold a personal item for more than one year before you sell it, your capital gain is long-term. If you hold it one year or less before you sell it, your capital gain is short-term. For additional guidance, see Publication 544, Sales and Other Dispositions of Assets.
How do I account for the fees I paid to an online marketplace related to the sale of my personal items? (added December 28, 2022)
A. You should include all fees (e.g., selling fees, payment processing fees, etc.) associated with the sale of your personal items in your basis when computing your gain or loss on the sale. See Publication 551 for additional information. In general, you should adjust your gain or loss on the sale of your property by the amount of expenses and fees paid to facilitate the sale. If you realize a gain on the sale of your property, report the selling expenses as a downward adjustment to the gain that you report on Form 8949 or Schedule D.
Box 1a of the Form 1099-K reports the gross amount of payment card/third party network transactions. This amount is not adjusted to account for fees, refunds, chargebacks, or other costs included in the unadjusted dollar amount of the payment transactions. If the Form 1099-K reports the total unadjusted dollar amount of the payment transactions and you separately paid selling expenses, you may need to make a separate adjustment to the resulting gain or loss. You should maintain and consult your own records to determine these amounts.
During the year, I sold my personal guitar for $800 on a social media platform's marketplace and I received Form 1099-K. I purchased the guitar several years ago for $3,000. How do I prove how much I paid if requested by the IRS? (added December 28, 2022)
A. Generally, you should keep accurate records for personal items you may sell. If your records are lost, destroyed, or are not available due to circumstances beyond your control and your return is audited, examiners may allow you to present reconstructed records. Additionally, examiners may accept oral testimony when records do not exist.
In this example you have a nondeductible personal loss. $800 sales price - $3,000 purchase price = ($2,200) loss amount. You can offset the proceeds reported on the Form 1099-K using some of your purchase price as shown here:
Form 1040, Schedule 1, Part I – Line 8z, Other Income. List type and amount: "Form 1099-K Personal Item Sold at a Loss…. $800" to show the proceeds from the sale reported on the Form 1099-K.
and
Form 1040, Schedule 1, Part II – Line 24z, Other Adjustments. List type and amount: "Form 1099-K Personal Item Sold at a Loss…. $800" to show the amount of the purchase price that offsets the reported proceeds. Do not report the $3,000 you paid for the purchase because a personal loss is not deductible.
In a single online transaction on an online marketplace, I sold two sets of four tickets (I bought for personal use) to two separate sporting events for $1,000 (one set for $800 and the second set for $200) and I received Form 1099-K. I purchased each set of tickets for $250 ($500 total) two months prior to selling them. How do I report the sale on my tax return? (added December 28, 2022)
A. You must report the gain and loss separately because the loss on the second set of tickets cannot offset the gain on the first set of tickets.
- $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 8949PDF and Schedule DPDF.
The $50 loss transaction from 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.
My friend and I went to a concert, and my friend reimbursed money to me for her concert ticket through an online application. If I get a Form 1099-K for the reimbursement, do I need to pay taxes on it? (added December 28, 2022)
A. Because the money is not payment for the sale of goods or the provision of services, generally the reimbursement would not be taxable to you.
If you believe the information on Form 1099-K, is incorrect, the form has been issued in error, or you have a question relating to the form, contact the filer, whose name and contact information appears in the upper left corner on the front of the form. You may also contact the payment settlement entity whose name and phone number are shown in the lower left side of the form.
If you cannot get the form corrected, the error should be reported on Form 1040, Schedule 1, Part I, Additional Income, Line 8z, Other Income, with an offsetting entry in Part II, Adjustments to Income, Line 24z, Other Adjustments.
For example, if you received $800 from a friend reimbursing you for a concert ticket and you received a Form 1099-K reporting this as gross proceeds, your Schedule 1 should reflect the following:
Form 1040, Schedule 1
Part I – Line 8z, Other Income. List type and amount: "Form 1099-K Received in Error…. $800" to show the proceeds reported on the Form 1099-K.
Part II – Line 24z, Other Adjustments. List type and amount: "Form 1099-K Received in Error…. $800" to offset the proceeds reported to you in error. Not reporting this adjustment could result in you improperly reporting gain on the reimbursement.
A. The IRS is delaying the requirement for third party settlement organizations to report income more than $600 threshold for calendar year 2022 (tax filing season 2023). However, the legal requirement for reporting income has not changed, regardless of the reporting threshold for providing a Form 1099-K.
Reporting does not impact a taxpayer's responsibility to accurately report ALL income, whether or not they receive a Form 1099-K or other information return (e.g., Form 1099-MISC, Miscellaneous Information; Form 1099-NEC, Nonemployee Compensation; etc.).
Except as otherwise provided in the Internal Revenue Code, gross income includes income from whatever source derived. A taxpayer can receive income in the form of money, property, or services. Publication 525, Taxable and Nontaxable IncomePDF, discusses many kinds of income and explains whether they are taxable or nontaxable.
Who can a taxpayer call if they have a question about their Form 1099-K? (updated December 28, 2022)
A. Taxpayers who have questions about the information on a Form 1099-K they received should contact the filer. The contact information is in the upper left corner on the form. If a taxpayer does not recognize the filer shown in the upper left corner of the form, they should contact the payment settlement entity whose name and phone number are shown in the lower left corner of the form above their account number.
If you have general questions about the Form 1099-K, please consult the Instructions for Form 1099-K. If you have general questions about information returns, please consult the General Instructions for Certain Information Returns.
Who can a payment settlement entity, or electronic payment facilitator/other third party call if they have a question on Form 1099-K? (updated November 21, 2022)
A. For questions about Form 1099-K, Payment Card and Third Party Network Transactions, see the general instructions for information returns.