1099-K: What It Means and What You Owe

A 1099-K is not a bill

Receiving a 1099-K does not mean you owe taxes on every dollar shown. It reports gross payments processed through a platform -- before fees, refunds, or any costs of goods sold. Your actual taxable income is almost always lower.

The $5,000 threshold (2025 forward)

Starting with 2025 tax returns (filed in early 2026), platforms like Etsy, PayPal, Venmo, Uber, and eBay must send you a 1099-K if they processed $5,000 or more in payments to you. This is a major change from the old $20,000 / 200-transaction rule.

What you owe tax on

You owe self-employment tax and income tax on your net profit -- not the 1099-K total. Net profit is gross income minus allowable business deductions (cost of goods, fees, mileage, home office, supplies). The 1099-K is the starting point, not the finish line.

Steps to take

1. Collect all 1099-Ks you received.
2. Subtract platform fees (Etsy, PayPal, Stripe) -- they are deductible.
3. Subtract any refunds issued.
4. Subtract your business expenses (materials, shipping, packaging, etc.).
5. Report the result on Schedule C.

If your 1099-K total is higher than what you actually received in your bank account, the difference is likely fees and refunds. Document both.