This article draws on the latest revisions to the Internal Revenue Service’s Frequently Asked Questions (FAQs) concerning Form 1099-K, Payment Card and Third Party Network Transactions, as detailed in Fact Sheet FS-2025-08, published in October 2025. These updated FAQs supersede the prior guidance posted in FS-2024-03. For tax professionals, understanding the finalized reporting thresholds, compliance obligations, and the nuanced guidance on reporting erroneous forms and personal item sales is critical.

It is important to note that these FAQs provide general information and have not been published in the Internal Revenue Bulletin; therefore, they will not be relied upon by the IRS to resolve a case. However, a taxpayer who reasonably and in good faith relies on this guidance will not be subject to penalties, such as a negligence penalty or other accuracy-related penalties, which impose a reasonable cause standard for relief, to the extent that such reliance results in an underpayment of tax. These FAQs were announced in IR-2025-107.

The Legislative Context and Reporting Thresholds

Form 1099-K is an IRS information return used to report certain payments, aiming to improve voluntary tax compliance. The requirement to file is triggered when payments for goods or services are received through a payment settlement entity (PSE).

The One, Big, Beautiful Bill (OBBB) retroactively reinstated the reporting threshold that existed before the passage of the American Rescue Plan Act of 2021 (ARPA). Consequently, a third party settlement organization (TPSO) is only required to file a Form 1099-K if the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200. This standard applies to payments received through TPSOs, which are the central organizations having the contractual obligation to make payments to participating payees of third party network transactions. Prior guidance, specifically Notices 2023-10, 2023-74, and 2024-85, had previously provided transition periods and penalty relief related to the now-superseded ARPA reporting threshold, which was $600 regardless of transaction count.

A Form 1099-K must be furnished if a good or service was sold, and the payment was received through a payment app or online marketplace, provided the gross payments and transactions exceed the federal reporting threshold. A payee may also receive a Form 1099-K from other payment settlement entities, such as merchant acquiring entities, because they do not have a de minimis reporting threshold. There is no threshold amount that must be met to receive a Form 1099-K for payments received via a payment card transaction (credit cards, debit cards, or stored-value cards/gift cards). If only $0.01 of payments is received from a payment card transaction, a Form 1099-K should be issued for those payments.

UPDATED GUIDANCE: Specifics from October 2025 Revisions

The October 2025 revisions detailed in FS-2025-08 include substantial changes across several sections, including General information, What to do if you receive a Form 1099-K, Common situations, and Third Party filers of Form 1099-K.

TIN Collection and Backup Withholding

Many third party ticket sales apps or online marketplaces are required to request a payee’s social security number (SSN) when payments are expected to exceed the $20,000/200 transaction reporting threshold, as the SSN needs to be reported on the Form 1099-K. An Individual Taxpayer Identification Number (ITIN) is also acceptable for Form 1099-K reporting.

Failure to provide an SSN, ITIN, or Employer Identification Number (EIN) may result in backup withholding. Backup withholding, under Internal Revenue Code (IRC) § 3406(a), Requirement to deduct and withhold, occurs if the payee has a missing or incorrect Taxpayer Identification Number (TIN), fails to show that they are exempt from backup withholding, or if the name on file does not match IRS or Social Security Administration records. If a payee was subject to backup withholding, the amount should be reported (as shown on Form 1099-K). Backup withholding also requires the TPSO to file a Form 945, Annual Return of Withheld Federal Income Tax, if withholding occurred during the prior year.

Handling Multiple Forms and Personal Sales

Receipt of Multiple Forms 1099-K (Q11): If a payee receives multiple Forms 1099-K reflecting different transactions, the payee should use all the forms and their other records to accurately determine their actual tax liability upon filing.
De Minimis Exception for TPSOs (Q6): For TPSOs, the reporting threshold of over $20,000 in payments and more than 200 transactions acts as a de minimis exception. TPSOs will not be subject to penalties under IRC § 6721, Failure to file correct information returns, or IRC § 6722, Failure to furnish correct payee statements, for failing to file or furnish Forms 1099-K unless both components of the federal threshold are exceeded.
Reporting Erroneous Forms or Personal Items Sold at a Loss (Q6 & Q7): Taxpayers receiving multiple erroneous Forms 1099-K or forms reporting proceeds from the sale of personal items sold at a loss should report the combined Form 1099-K amounts in the entry space at the top of Schedule 1 (Form 1040), Additional Income and Adjustments to Income.
- For calendar years 2022 and 2023, the IRS allows an alternative reporting method where tax software may input the gross proceeds amount as a positive and the offsetting negative amount on Schedule 1, Line 8z, Other Income, instead of offsetting amounts on Line 24z, Other Adjustments.
- For tax years beginning in 2024, the combined amounts must be reported in the entry space at the top of Schedule 1 (Form 1040). Note that sales of personal items at a loss may alternatively be reported on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D.
Reporting Bifurcated Personal Item Sales (Q4): When a single Form 1099-K reports proceeds from multiple personal item sales where one results in a gain and the other a loss, the transactions must be reported separately. For example, if two sets of tickets bought for personal use at $250 each are sold in one transaction for $1,000 (Set 1 sold for $800, Set 2 sold for $200):
- The gain of $550 ($800 sales price minus $250 purchase price) must be reported as short-term gain on Form 8949 and Schedule D.
- The loss of $50 ($200 sales price minus $250 purchase price) is not deductible. The gross proceeds amount ($200) related to the loss item should be reported by including $200 in the entry space at the top of Schedule 1 (Form 1040).

Compliance and Coordination of Information Returns

Interaction with Forms 1099-MISC and 1099-NEC (Q11): If a transaction is reportable under IRC § 6050W (Form 1099-K) and simultaneously reportable under IRC § 6041, Information at source, or IRC § 6041A(a), Returns regarding payments of remuneration for services (Forms 1099-MISC/NEC), the transaction should only be reported on Form 1099-K. Dual reporting is prohibited.
Voluntary Reporting Below Threshold (Q12): A payor is permitted to issue an information return (including Form 1099-K or Form 1099-NEC/MISC) to both the recipient and the IRS even if the mandatory reporting threshold has not been met. This may be done, for example, to assist the recipient in claiming a deduction for qualified tips.
Executive Order 14254 and Ticket Scalpers (Q21): Executive Order 14254, Combating Unfair Practices in the Live Entertainment Market, issued March 31, 2025, directs the Secretary of the Treasury and the Attorney General to ensure that "ticket scalpers are operating in full compliance with the Internal Revenue Code". Income derived from ticket sales is included in gross income. PSEs, including TPSOs, facilitating ticket sales or re-sales must file Form 1099-K if they exceed the federal threshold. Payors not classified as PSEs may still be subject to information reporting rules under IRC § 6041 or IRC § 6041A. For payments made after December 31, 2025, the reporting threshold for Form 1099-MISC or Form 1099-NEC is met if the amount of payments to a recipient totals $2,000 or more.

Gross Payment Calculation and Tax Liability

Form 1099-K reports the gross payment amount (Box 1a), which is the total dollar amount of reportable payment transactions. This gross amount does not include adjustments for fees, credits, refunds, shipping, cash equivalents, or discounts. Taxpayers can deduct those items from the gross amount when reporting the income on their tax return. The reported gross payment amount also does not account for the original purchase price, or basis, of any items sold or whether the items were sold at a gain or loss. Taxpayers must utilize the Form 1099-K in conjunction with other tax records to accurately compute and report their income.

It is crucial to advise clients that receiving a Form 1099-K does not inherently mean the entire amount reported is taxable. Conversely, the lack of a Form 1099-K does not preclude taxability, as all income is taxable unless the tax law dictates otherwise. Payments received as gifts or reimbursements for shared costs are generally not considered payments for goods or services and are therefore not reportable on Form 1099-K.

Prepared with assistance from NotebookLM.