What is a 1099-K?
The 1099-K is one of 15 different types of “information forms” the IRS uses to report payments facilitated between individuals (you may have received or heard of a 1099-MISC or W-2 which are also information forms). In the past few years, companies like Uber, Kickstarter, eBay, and others have started to use 1099-K forms to report payments facilitated on their online or mobile platforms. This article focuses on a 1099-K sent to individuals for facilitated payments (in the case you’re receiving a 1099-K from Uber, for example).
Uber uses 1099-Ks to report the fares you receive, because Uber technically functions as a third-party payment facilitator between you and your passengers.
Two key differences between a 1099-K different from a 1099-MISC
#1 - High Threshold: The threshold for receiving a 1099-K is if a company facilitated over 200 transactions on your behalf totaling more than $20,000. But because that threshold is so high, many companies will send a 1099-K even if you didn’t reach that threshold. Uber, for example, will issue 1099-Ks to drivers even if they haven’t reached this high threshold.
#2 - Gross Reporting: Companies using 1099-Ks are required to report gross transactions they facilitated. In the case of Uber, that means the fees and commissions that Uber takes out are included on the 1099-K form. (Rest-assured: You won’t have to pay taxes on company commissions or on any fees associated with working with that company! But, you’ll need to deduct commission and fees on the Schedule C).
How do I use this form when filing my taxes?
The most important box that you’ll use on this form is Box 1a - Gross amount of payment card/third party network transactions. This is the total you’ll use when calculating your business profit or loss on the Schedule C. This number will go on Part I, Line 1 of your Schedule C.
What if my 1099-K has a mistake?
First, make sure you’ve double-checked that the total reported equals the total amount the company processed. This means for Uber that you should add up all of their fees and the amount that was sent to your bank account. This should match what your 1099-K shows. If it doesn’t, reach out to the company quickly to have your form corrected.
Additionally if the IRS sends a notice about underreporting on your 1099-K form. Here’s what to do:
- Respond within the amount of time allowed in the letter
- Provide an explanation as to why you reported the amount of income on your Schedule C.
- If you filed your tax filing before the 1099-K was corrected provide that as your reasoning. It is best to not file your tax filing until the 1099-K is corrected.
- Seek a tax professional to help you through the process if you need further assistance.
Laura Zulliger has spent the past five years empowering independent contractors with knowledge about health, taxes, and personal finance. Prior to joining Stride, she worked at NerdWallet and Zen99, two companies that specialize in helping people make better financial decisions.