Remember the days when you checked the contents of your mailbox and found a birthday card from your grandma or a handwritten letter from a friend? Those are the kind of surprise pieces of mail you are happy to find.
Still, not all surprise pieces of mail are welcome… especially when they have to do with your taxes. But thanks to the gradual lowering of the reporting threshold for payments on goods and services via third-party vendors, that’s exactly what could happen to you this year.
And, just in case you’re tempted to toss it, thinking Venmo misclassified the payment you received for your living room set as a “business” transaction… let me give you the same word of caution I give to all my Houston clients. Every tax document is important and should be kept on hand – even if you think it’s wrong.
So, let me ask you: Did you receive a surprise 1099-K this year?
That’s something we can address in your tax filing appointment:
calendly.com/postalplustax
We can address this and every other tax document ahead of the tax deadline. That way, if you have a surprise amount you owe, you’ll still have time to arrange payment for it.
I’m here to help you with every frustrating and unexpected tax hurdle coming your way. And to give you some further clarity ahead of our meeting, let me explain that 1099-K situation a bit more…
What Is A 1099-K: Clearing Up Confusion For Houston Filers
“It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.” – Franklin D. Roosevelt
Did you get an unexpected 1099 tax form in your mailbox recently (physical or digital)? You’re not the only one surprised – millions more people are receiving a 1099 this year than in years past, and most of them don’t know what to do with it.
That’s where I come in.
I get it – another tax form you’ve never seen before is probably not something you want to (or have time to) figure out right now. So, as best I can, I want to help answer your questions about what a 1099 is, why you got it, and what you need to do with it now.
“What is a 1099?”
A 1099 form documents income earned from self-employment, freelance work, investments, or other sources outside of traditional employment. A 1099-K (the one you may have received unexpectedly) is for any income you received from a payment card or third-party network transactions beyond a specific threshold.
AKA – credit card payments, payments through processors like PayPal or Venmo, or transactions through online marketplaces.
An important thing to note here: You still have to report business income from these payment methods on your taxes, even if you don’t hit the threshold and receive a 1099-K.
“What is a 1099 doing in my mailbox?”
Previously, the 1099-K threshold was 20k in payments AND at least 200 transactions. It now sits at 5K (with no minimum number of transactions), but possibly not for long – the threshold is expected to drop to 2.5K in 2025, and then to 600 dollars in 2026.
But, for this tax season, you just need to worry about the 5K threshold.
“What do I do with it?”
Definitely don’t lose it in the mountain of papers sitting on your desk (or let the kids spill apple juice on it).
1) Make sure all the information is up to snuff. Check your tax ID (either SSN or EIN), the total gross amount reported (which doesn’t factor in refunds, fees, or expenses), the payer information, and the transaction type and date.
If anything is off, you’ll need to request a corrected form from the issuer (NOT the IRS) with the contact information in the top left corner of the form.
2) Figure out if the income is taxable – because receiving the form doesn’t automatically mean you owe taxes. For example, personal transactions like selling your couch to a friend (unless sold for a larger amount than the purchase price) or getting reimbursed for a coffee run are not taxable. But if it’s any kind of business income, it’s taxable.
Now, if your 1099-K includes both business and personal transactions, only report the business-related portion as taxable income. And have records available like bank statements, invoices, and receipts that prove which transactions were personal or business.
3) Report it on your tax return. For business income, report it on Schedule C if you’re self-employed or a sole proprietor. For occasional or hobby sales, report your gains on Form 8949 and Schedule D for Capital Gains and Losses.
And if it’s not taxable, keep the documentation just in case the IRS pokes its nose in. I’ve seen it plenty of times – my Harris County clients get Form 1099-K for their personal transactions, simply because payment processors and third-party networks don’t know the difference between your business and personal affairs.
If this is the situation you’re in, you can file a statement with your tax return explaining why the 1099-K income is non-taxable.
And as with everything tax-related, you need to keep records (like receipts, transaction histories, business expenses, the works) in case of any hiccups. The IRS cross-checks your 1099-K against your tax return, and if you don’t report correctly, it can trigger an automated underreporting notice.
Still tracking with me? If not, that’s okay. Because I can help you get your surprise 1099-K taken care of at your tax filing appointment. This is something that’s likely affecting you for the first time, and I get how frustrating it can be trying to navigate a new hurdle with your taxes. Which is why I’m here to help. Let’s find a time to chat:
calendly.com/postalplustax
Always in your corner,
Dominic Nguyen