So, What is a 1099-K?
If you collect payments online, this is for you.
You may be familiar with the 1099 contractor rule that anyone who gets paid over $600 in a given year gets a 1099 from the person or entity paying. This is a bit different if you make money through PayPal, Stripe and other merchant services.
If you get paid via these services, they will report your income on a form called the 1099-K if you meet the criteria. This includes $20,000 of income and at least 200 charges. This may seem like a lot, but if you run your business on a payment platform and rely on one, this is very common to hit.
Getting a 1099-K just means that this income was reported to the tax agencies and needs to be claimed on your tax return. You should be claiming this already, so if you are on the receiving end, it should be business as usual.
If you are on the paying end of the transaction, you only need to issue a 1099 to those you pay over $600 if you pay them through a means like cash, check, ACH or other cash apps that do not report. If you pay by PayPal, Stripe, Square and other merchant services, you do not need to issue a 1099 even if they cross the higher thresholds because the merchant services companies will issue them a 1099-K.
If you are unclear about your responsibilities, you can always research the products you use and educate yourself on the tax reporting you can expect. Below are some resources to help: