E-commerce tax

    1099-K threshold 2026: what online sellers need to know

    Form 1099-K reports the gross payments you received through a marketplace, payment app or card processor. It is almost never your taxable profit. Here is the current threshold, which states set a lower one, and how to get from the 1099-K number to the profit you actually report, as of October 2026.

    Free consultation Send a message

    Free initial consultation · No obligation

    • Last reviewed October 18, 2026
    • Sources linked below

    What is the 1099-K threshold for 2026?

    As of October 2026, payment apps and online marketplaces file Form 1099-K only when your payments exceed $20,000 and you have more than 200 transactions. The IRS says the One, Big, Beautiful Bill retroactively reinstated this test. Card processors report any amount, and some states use lower thresholds. Your Virtual CPA, a licensed CPA firm, reconciles 1099-K totals to profit. Request a free consultation.

    The federal 1099-K threshold, in the IRS’s words

    In IR-2025-107 (October 23, 2025), the IRS said the One, Big, Beautiful Bill “retroactively reinstated” the reporting threshold in effect before the American Rescue Plan Act of 2021. Third party settlement organizations, meaning payment apps and online marketplaces, do not have to file a 1099-K unless your gross payments exceed $20,000 and the number of transactions exceeds 200.

    The IRS’s Fact Sheet 2025-08 adds three points sellers miss:

    • Card payments have no threshold. If customers pay you by credit or debit card through your own card processor, you should get a 1099-K for any amount.
    • You can get one below the threshold. Platforms may send a 1099-K for smaller amounts, and your state may require it.
    • No form does not mean no tax. All business income is reportable whether or not a 1099-K arrives.

    For the bigger picture on structure, state income tax and estimates, see taxes for online businesses.

    States with lower 1099-K thresholds

    Some states make platforms report at much lower amounts. These are reporting rules. They do not change what is taxable. As of October 2026:

    • Virginia: platforms must send a 1099-K to Virginia addresses at $600 or more. Source: Virginia Tax.
    • Massachusetts: $600 or more, regardless of the number of transactions, under 830 CMR 62C.8.1. Source: Massachusetts DOR.
    • Illinois: platforms file 1099-Ks with the state when a payee has four or more transactions totaling over $1,000. Source: Illinois Publication 110.

    Other states have their own rules and they change. Check your state tax agency’s 1099-K page before you rely on a list.

    Why your 1099-K is higher than your profit

    The IRS’s What to do with Form 1099-K page says the gross amount in Box 1a is not adjusted for fees, credits, refunds, shipping, cash equivalents or discounts. You can deduct those from the gross. Platforms also define gross a little differently:

    • TikTok Shop reports unadjusted gross sales: product price plus shipping fees, minus seller discounts. Refunds, platform discounts and shipping subsidies are not subtracted. See TikTok Shop taxes.
    • Etsy reports gross sales processed through Etsy Payments. Etsy says fees, refunds, shipping costs and sales tax you collected are not subtracted, while sales tax Etsy collects and remits is not in the total. See Etsy seller taxes.
    • Shopify, eBay, Amazon and PayPal each publish a 1099-K in your account’s tax documents area. Pull the platform’s matching transaction or order report so you can see what is inside the gross number.

    Payouts to your bank are net of fees, refunds, labels, chargebacks and reserves, and they arrive later. That is why booking revenue from bank deposits understates sales and hides fees you can deduct.

    How to reconcile a 1099-K to your return

    1. Check the form. Confirm the TIN and the gross amount. If your business files Form 1120-S, 1120 or 1065 but the form shows your SSN, the IRS says to get it corrected.
    2. Pull the platform detail. Download the order or transaction report that ties to the 1099-K total for the same calendar year.
    3. Back out what is not income. Refunds, sales tax you collected and remitted, personal items sold at a loss, and payments that belong to someone else.
    4. Subtract costs. Cost of goods sold, platform fees, shipping and other business expenses. See inventory and COGS for small businesses.
    5. Report in the right place. The IRS says sole proprietors and hobby sellers use Schedule C for goods sold, partnerships and corporations use their own returns, and personal-item sales go on Schedule 1 or Form 8949.
    6. Keep the workpaper. A one-page reconciliation from 1099-K gross to reported sales answers most IRS letters quickly.

    How it works with us

    Best for: online sellers with one or more 1099-Ks that do not match their books, sellers who got a 1099-K for personal items, and anyone who received an IRS letter about 1099-K income. We work with clients nationwide.

    1. Free initial consultation. Tell us which platforms you sell on and what forms you received.
    2. Fees quoted upfront, in writing. Transparent, fair fees in an engagement letter before work starts.
    3. Reconcile. We tie each 1099-K to platform reports, payouts and your books.
    4. File. We prepare your tax return with the 1099-K amounts reported the way the IRS describes.
    5. Fix the source. We set up e-commerce bookkeeping so next year’s numbers tie out from the start.

    From 1099-K gross to taxable profit: what reduces it

    ItemWhat to do with itRecords to keep
    Gross payments (Box 1a)Starting point. Compare to the platform’s own report for the same year.Form 1099-K, platform order or transaction report
    Refunds and cancelled ordersSubtract as returns and allowances.Refund report from each platform
    Discounts, credits and platform subsidiesSubtract if they are inside the gross amount.Order report showing discounts
    Platform and payment feesDeduct as business expenses (referral, transaction, processing and ad fees).Monthly fee statements
    ShippingShipping charged to buyers is part of sales. Postage and labels you pay are deductible.Label invoices, carrier statements
    Sales taxNot your income. Back out tax you collected and remitted. Marketplace-remitted tax is often excluded already.Sales tax reports and returns
    Cost of goods soldSubtract the landed cost of items you sold this year. Unsold inventory waits.Supplier invoices, freight and duty bills, inventory counts
    Personal items sold at a lossNot taxable. Zero out on Schedule 1 or report on Form 8949.Proof of what you originally paid
    Payments from friends and family or that are not yoursNot income. Ask the issuer for a corrected 1099-K.Correspondence with the issuer

    Expert CPAs. Personal attention.

    1099-K doesn’t match your books? Bring your forms and platform reports to a free initial consultation and talk to a CPA.

    Free consultation Send a message

    Frequently asked questions

    For payment apps and online marketplaces, the federal threshold is more than $20,000 in gross payments and more than 200 transactions in the year. The IRS says the One, Big, Beautiful Bill retroactively reinstated this threshold (IR-2025-107). Payment card processors report any amount. Some states require 1099-Ks at lower amounts.

    The business income behind it is. The 1099-K itself is only a report of gross payments. The IRS says the gross amount is not adjusted for fees, credits, refunds, shipping, cash equivalents or discounts, and you can deduct those from the gross. You pay tax on your profit after cost of goods sold and expenses.

    If you sell goods regularly to make a profit, yes. The IRS says sellers, gig workers and other self-employed people report 1099-K payments on Schedule C. Net profit of $400 or more is generally subject to self-employment tax. Selling your own used belongings is different and is not self-employment income.

    Not if you sold the items for less than you paid. The IRS says you can zero out the reported amount on Schedule 1 or report the loss on Form 8949. A loss on personal items is not deductible. If you sold an item for more than you paid, the gain is taxable and goes on Form 8949 and Schedule D.

    Because payouts are net and the 1099-K is gross. Platforms subtract fees, refunds, shipping labels, ad charges and reserves before paying you. Some platforms also count shipping charged to buyers in the gross. Timing differs too: a platform may count a sale when the buyer paid, while the payout lands weeks later.

    Several. As of October 2026, Virginia requires a 1099-K at $600 and Massachusetts at $600 regardless of transaction count. Illinois requires platforms to file a 1099-K with the state when a payee has four or more transactions totaling over $1,000. Other states have their own rules, so check your state tax agency.

    Contact the issuer listed as the Filer on the form and ask for a corrected 1099-K. The IRS cannot correct it for you. Do not wait to file: report the amount as the IRS directs and back out the incorrect part with your records. Keep copies of everything you sent and received.

    It can cause a mismatch. The IRS says that if your name and SSN are on the 1099-K but you report the business income on Form 1120, 1120-S or 1065, you need to have the form corrected. Update your W-9 with each platform so future forms use the business name and EIN.
    Send a messageFree consultation