Actions to take if a Form 1099-K is received in error or with incorrect information
FS-2023-07, March 2023
With this year’s April 18 tax deadline just around the corner, the Internal Revenue Service is offering these tips to taxpayers who received an incorrect Form 1099-K or received one of these forms in error. The IRS also explains how to report these transactions on their tax return.
What is a 1099-K.
Form 1099-K, Payment Card and Third-Party Network Transactions, is an IRS form that is used to report certain payment transactions. Taxpayers use information reported on this form, along with their other tax records, to determine their correct tax liability. All income must be reported, unless it’s excluded by law. This is true, whether or not they receive a Form 1099-K.
The 1099-K reports various business transactions, including income from:
- A business the taxpayer owns.
- Self-employment.
- Activities in the gig economy.
- The sale of personal items and assets.
They will typically receive this form annually by Jan. 31 for transactions occurring during the prior year. This means that 2022 transactions were reported on the form they received by Jan. 31, 2023.
Form 1099-K received in error or with incorrect information
Some taxpayers may have incorrectly received a Form 1099-K, such as for the sale of personal items. In other cases, the form may have been issued in error – such as for transactions between friends and family, or expense sharing.
If this happens, or if the information on the form is wrong, contact the issuer of the Form 1099-K immediately. The issuer’s name appears in the upper left corner on the form along with their phone number. Taxpayers should keep a copy of all correspondence with the issuer for their records.
If a corrected 1099-K cannot be obtained
If taxpayers can’t get a corrected Form 1099-K, report the information on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, as follows:
- Part I – Line 8z – Other Income – Form 1099-K Received in Error.
- Part II – Line 24z – Other Adjustments – Form 1099-K Received in Error.
The net effect of these two adjustments on adjusted gross income would be $0.
Personal item sold at a loss
Similarly, if a taxpayer receives a Form 1099-K for a personal item sold at a loss, report the information on Schedule 1 with offsetting transactions.
For example, a taxpayer who received a Form 1099-K for selling a couch online for $700 would report on Form 1040:
- Part I – Line 8z – Other Income – Form 1099-K Personal Item Sold at a Loss $700.
- Part II – Line 24z – Other Adjustments – Form 1099-K Personal Item Sold at a Loss $700.
The net effect of these two adjustments on adjusted gross income would be $0.
Personal item sold at a gain
If a taxpayer sells an item owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry or silverware, etc., at a profit, this is reported as a capital gain. Report the gain as any other capital gain on Form 8949, Sales and other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses.
Mix of personal items sold – some at a gain and others with a loss
Taxpayers must report gains and losses separately. Gains for assets cannot be offset by losses from the sale of personal assets.
If a taxpayer sold an item owned for personal use at a gain, see Personal items sold at a gain for information on how to report.
For personal items sold at a loss, follow the instructions for Personal items sold at a loss.
Planning ahead for 2023
The American Rescue Plan of 2021 changed the reporting threshold requirement for payment apps, also known as third-party settlement organizations. The IRS announced that the new Form 1099-K reporting threshold will start in tax year 2023.
- The old threshold was $20,000 and 200 transactions per year. This applies to tax year 2022 and prior years.
- The new threshold is more than $600. This applies to tax year 2023 and future years.
The threshold change means some people may receive a Form 1099-K who have not received one in the past. There are no changes to what counts as income or how tax is calculated.
The IRS will share more information soon about 1099 reporting for 2023 that will be in effect for the 2024 tax season. In the meantime, the IRS reminds taxpayers that money received as a gift or for reimbursement does not require a 1099-K. Taxpayers can minimize the chance of receiving one of these forms in error by asking friends or family members to correctly designate that type of payment as a non-business-related transaction. The taxpayer should also make a note of what the payment was for and who sent it. Good recordkeeping is key.
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