Over the past decade, more businesses and individuals have turned to third-party payment-processing services to receive payments. For example, Stripe processed $1.9 trillion in payments for businesses in 2025. This trend has implications for where customers do business and how they make purchases, but it also affects tax season. The use of Form 1099-K has increased in recent years. Form 1099-K is a US IRS tax form used by payment processors and third-party platforms to report the total payments a business or individual receives through electronic transactions for goods and services. This includes payments from credit, debit, and stored value cards such as gift cards, as well as payments from apps or online marketplaces.

Form 1099-K ensures that small-business owners, payment settlement entities (PSEs), and independent contractors report all of their income accurately to the IRS. Every business that accepts payments through third-party providers needs to learn how to use this form, and failure to comply with the reporting requirements can result in penalties and fines.

Below is an overview of Form 1099-K, including what it is, what purpose it serves, who is required to file this form, what information is required on the form, and how to report it on your tax return. We will also cover common errors that people make when filling out the form and how to correct information, if necessary. By understanding the importance of Form 1099-K and how to comply with the reporting requirements, businesses can avoid potential penalties and stay on top of tax obligations.

What’s in this article:

• What is Form 1099-K?
  
• Who receives Form 1099-K?
  
• Information required on Form 1099-K
  
• Threshold for Form 1099-K
  
• Resources for filing your 1099-K
  
• How to report Form 1099-K on your tax return
  
• How to correct information on Form 1099-K
  
• Penalties for noncompliance
  
• How Stripe Connect can help
  

What is Form 1099-K?

Form 1099-K is an informational US tax form that PSEs submit to the IRS to report certain types of payments made by PSEs to businesses or sellers. These payments include online sales and other types of transactions. PSEs include companies such as Stripe and other payment-processing services that facilitate electronic transactions.

Form 1099-K includes the gross amount of payments processed by the PSE on behalf of the seller. Form 1099-K helps the IRS ensure that sellers report all their income, and it also helps PSEs comply with their reporting obligations. The seller should use Form 1099-K alongside other records from the year to figure and report their taxable income when filing their tax return. Sellers are responsible for making sure they report their Form 1099-K income on their tax returns.

Some individuals and businesses might also receive 1099-NECs, but these are not the same as 1099-Ks. A 1099-K reports a third-party transaction, while a 1099-NEC reports non-employee compensation, which is money that a person earns by working as a freelancer for a company or organization.

Who receives Form 1099-K?

Form 1099-K is meant for individuals or businesses that receive payments through PSEs, such as Stripe and other payment-processing services. For the 2025 tax year, PSEs are required to send Form 1099-K to any payee who has received payments totaling more than $20,000 and processed more than 200 transactions during the calendar year.

For example, if you run an online business and use Stripe to receive payments from customers, Stripe will send you a Form 1099-K if your transactions meet the reporting threshold. The form will report the gross amount of payments you received through Stripe during the year.

Here are some examples of the types of businesses that typically receive Form 1099-K:

• Online retailers and ecommerce businesses that use payment-processing services such as Stripe to receive payments from customers
  
• Freelancers or independent contractors who receive payments through payment-processing services
  
• Gig-economy workers who provide services through apps such as Uber or Lyft and receive payments through those platforms
  
• Marketplace sellers who sell goods on platforms like Amazon or Etsy and receive payments through those platforms
  
• Nonprofit organizations that accept donations through payment-processing services
  
• Subscription-based services that charge recurring payments through payment-processing services
  

Sometimes, individuals and businesses receive 1099-Ks for personal reimbursements. These are generally not taxable, but should be documented to avoid reporting errors.

Information required on Form 1099-K

Here is the information that is typically required on Form 1099-K:

• Payer information
  This includes the name, address, and tax identification number (TIN) of the PSE that is reporting the payments made to the payee.
  
• Payee information
  This includes the name, address, and TIN of the individual or business receiving the payments.
  
• Payment information
  This includes the gross amount of payments made to the payee through the PSE during the calendar year, broken down by month.
  
• PSE transaction information
  This includes the number of transactions processed by the PSE on behalf of the payee during the calendar year.
  

Filing your 1099-K is easier when your payments provider keeps careful track of your transactions and total sales. At tax time, you want a provider you can rely on to give you the necessary information.

Threshold for Form 1099-K

Per the One, Big, Beautiful Bill Act of 2025, the federally mandated threshold of income through a third-party payment provider that triggers the need for payees to file a 1099-K form is $20,000 (and more than 200 transactions). There are a few exceptions:

• District of Columbia, Maryland, Massachusetts, Montana, Vermont, and Virginia: The threshold is $600 in gross volume, with no minimum transaction threshold, in any given year
  
• Arkansas: The threshold is $2,500 in gross volume, in any given year
  
• Illinois: The threshold is four transactions and $1,000 in gross volume, in any given year
  
• New Jersey: The threshold is $1,000 in gross volume, in any given year
  
• Rhode Island: The threshold is $100 in gross volume, in any given year
  

Understanding and complying with the Form 1099-K threshold

Businesses should be aware of the $20,000 and 200 transaction 1099-K threshold, including those that sell products or services online, accept donations, or provide freelance services. Businesses that are not aware of the threshold could find themselves in violation of IRS regulations. Here are some tips for complying with the threshold:

• Keep track of all of your payments made through third-party payment networks.
  
• Review your tax return carefully to make sure you have reported all of your income.
  
• Consult with a tax professional if you have any questions about the threshold.
  

Resources for filing your 1099-K

For Stripe Direct or Standard Connect users, you can learn more here about Form 1099-K for payments received through Stripe. For platforms that use Stripe and need to file 1099 tax forms for connected user accounts, go here for more information. For more help understanding your 1099-K, visit “Understanding Your Form 1099-K” on the IRS website. You can also download a blank example of the 1099-K form here.

How to report Form 1099-K on your tax return

Here’s how to report Form 1099-K on your tax return:

• Review the information on your Form 1099-K: Check the name and TIN to make sure they are correct. Also, verify the gross amount of payments reported on the form.

• Determine how to report the income, and include it on your tax return: The income reported on Form 1099-K is generally considered business income. If you are a business owner and you operate as a sole proprietor or single-member LLC, you should report this income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). If your business is a partnership or corporation, you will report it on your respective business tax return, such as Form 1065 or 1120. If you received the 1099-K as a result of a hobby, you should report the income on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, under “Other income.”

The income reported on Form 1099-K is your gross payment volume, which may not be the same as your actual taxable income. For example, if you are reporting as a business, you may be able to deduct expenses related to generating the income, such as shipping costs or materials. The basic process for determining your net taxable income is to subtract your business expenses from your gross 1099-K payments. Depending on what type of business you run, expenses might be costs such as shipping fees, software, office supplies, or other spending associated with running your company. Make sure to keep accurate records of your business expenses, so that you can deduct them on your tax return and reduce your taxable income where allowed.

How to correct information on Form 1099-K

If you discover an error on your Form 1099-K, you should try to get it corrected as soon as possible. Here are some common errors you might spot on your Form 1099-K:

• Incorrect name or TIN
  The name and TIN on the form must match your legal business name or personal information.

• Incorrect payment amounts
  The gross payment amount on Form 1099-K should reflect the total volume of payments you received through the PSE during the tax year.

• Duplicate reporting of payments
  If you receive more than one Form 1099-K from the same PSE, the PSE may have duplicated reporting of payments.

If you have errors on Form 1099-K, follow these steps to correct them:

• Contact the PSE that issued the form
  Notify the PSE of the error and request that they issue a corrected form with accurate information.

• Obtain a corrected form
  Once the PSE has corrected the information, they will issue a corrected Form 1099-K. Make sure to keep a copy for your records and use the corrected form when filing your tax return.

• File an amended tax return, if necessary
  If you have already filed your tax return with the incorrect Form 1099-K, you may need to file an amended tax return to correct the information.

Carefully reviewing all forms for accuracy is an important part of managing taxes as a business. Working with the right partners to facilitate your payments can make this process easier. Correcting errors on these forms can help you avoid penalties and ensure that you report all of your income accurately.

Penalties for noncompliance

Because the IRS uses the information reported on Form 1099-K to ensure that taxpayers report all of their income accurately, failure to comply with the reporting requirements can result in penalties and fines. If PSEs fail to file Form 1099-K, or file an incorrect or incomplete form, they also may be subject to penalties.

The IRS might penalize a PSE under these circumstances:

• If they fail to file in a timely manner
  
• If they fail to include all required information
  
• If they include incorrect information
  

A penalty could also apply if any of the following is true:

• If a PSE files on paper when they were required to file electronically
  
• If they report an incorrect TIN
  
• If they fail to report a TIN
  
• If they fail to file paper forms that are machine readable (when this is required)
  

The fee for noncompliance is based on when you eventually file the correct form. The penalty structure is:

• If you correctly file within 30 days after the due date: $60 per return, with a maximum penalty of $683,000 per year ($239,000 for small businesses*)
  
• If you correctly file more than 30 days after the due date but before August 1: $130 per return, with a maximum penalty of $2,049,000 per year ($683,000 for small businesses)
  
• If you file after August 1, or don’t file at all: $340 per return, with a maximum penalty of $4,098,500 per year ($1,366,000 for small businesses)
  

*For this purpose, the IRS considers you a small business if your average annual gross receipts for the three most recent tax years (or however long your business has existed, if that’s less than three years) ending before the calendar year in which the information returns were due are $5 million or less.

Similarly, if a business fails to report income reported on Form 1099-K, the IRS might subject it to accuracy-based penalties for underreporting income. The penalties for underreporting income can be as much as 20% of the underpaid tax amount, plus interest.

How Stripe Connect can help

Stripe Connect orchestrates money movement across multiple parties for software platforms and marketplaces. It offers quick onboarding, embedded components, global payouts, and more.

Connect can help you:

• Launch in weeks: Use Stripe-hosted or embedded functionality to go live faster, and avoid the up-front costs and development time usually required for payment facilitation.

• Manage payments at scale: Use tooling and services from Stripe so you don’t have to dedicate extra resources to margin reporting, tax forms, risk, global payment methods, or onboarding compliance.

• Grow globally: Help your users reach more customers worldwide with local payment methods and the ability to easily calculate sales tax, VAT, and GST.

• Build new lines of revenue: Optimize payment revenue by collecting fees on each transaction. Monetize Stripe’s capabilities by enabling in-person payments, instant payouts, sales tax collection, financing, expense cards, and more on your platform.

Learn more about Stripe Connect, or get started today.