[Updated 2025.7] Under the latest law, a 1099-K will be issued for third-party payments only if they exceed $20,000 or 200 transactions. This change will take effect in 2025, meaning the new rule applies directly to tax year 2025. In other words, for payments received this year through PayPal, Venmo, and similar platforms, no 1099-K will be issued as long as both the amount and the number of transactions stay under the threshold.

Of course, as we discuss in the article below, even if a 1099-K is issued, it is still just a record that alerts you that you may need to consider it when filing taxes. Whether you actually owe taxes depends on whether the income is taxable—for example, business-related income. If it is simply a rebate, or you are just selling used items, then it is not taxable to begin with, and you generally do not need to worry about this form at all.

This article is compiled based only on original IRS materials and general tax-filing knowledge, and is for reference only. If you have a related tax situation, please consult a qualified CPA or tax professional. Thank you!

Bottom Line

It is tax season again, and most people are already familiar with forms like 1099-MISC and W-2. But some people unexpectedly receive Form 1099-K, most often from PayPal. So how should you handle it on your tax return? Before getting into the explanation, here is the short answer:

  • Do not panic if you receive a 1099-K (F-1 students and J exchange visitors should not panic either—see the discussion below)
  • Taxable income still needs to be reported
  • Nontaxable income can be ignored
  • This form is mainly for your own recordkeeping and for IRS matching/audits

What Is a 1099-K?

Let’s first look at how the IRS defines Form 1099-K (original IRS text):

Form 1099-K, Payment Card and Third Party Network Transactions, is an IRS information return used to report certain payment transactions to improve voluntary tax compliance.  You should receive Form 1099-K by January 31st if, in the prior calendar year, you received payments:
  • from payment card transactions (e.g., debit, credit or stored-value cards) , and/or
  • in settlement of third-party payment network transactions above the minimum reporting thresholds of –
    • gross payments that exceed $20,000, AND
    • more than 200 such transactions

In plain English:

A 1099-K is a record of certain transactions involving payment cards and third-party payment networks. It is used by the IRS to improve tax compliance. You generally receive Form 1099-K by January 31 each year, and it relates to transactions from the previous calendar year.

  • These transactions may come from debit cards, credit cards, or stored-value cards; and/or
  • Transactions processed through third-party payment networks. If the total amount from third-party payment network transactions exceeds $20,000 and the number of transactions exceeds 200, that can trigger Form 1099-K (sent to both you and the IRS)

Taken literally, Form 1099-K is simply a record of transaction data generated through certain third-party payment platforms. Once the transaction count and total amount meet the threshold, the information is sent to the IRS to help it determine whether there may be underreported income.

Why Did You Receive a 1099-K?

The first thing to understand is that Form 1099-K is only a record of certain transactions. It does not say what those transactions were for. Here are some situations in which you might receive a 1099-K:

  • You sell items on eBay and use PayPal for settlement. More than $20,000 per year and more than 200 transactions
  • A buyer sends you money through PayPal using the goods and services / merchant payment type (the one with fees). More than $20,000 per year and more than 200 transactions
  • You run a small shop and accept payments using a Square card reader. More than $20,000 per year and more than 200 transactions
  • You use PayPal to buy cryptocurrency (such as Bitcoin). More than $20,000 per year and more than 200 transactions
  • You live in certain special states (discussed later), where receiving money through PayPal may trigger a 1099-K even if you do not meet the transaction-count or dollar thresholds

In short, receiving a 1099-K means you had these kinds of transactions. It does not automatically mean you must pay tax on them, nor does it by itself affect your immigration status.

How Should You Report It on Your Tax Return?

If you want the one-sentence answer: report it according to the nature of the income.

Business Activity

If these transactions came from business activity—for example, if you are a large eBay seller, you own a restaurant, or people pay you membership fees online—then you do need to report that income to the IRS. Put simply, you can combine the income shown on Form 1099-K with income you received through other methods to calculate your gross income and then your net income. Of course, you should verify the accuracy of Form 1099-K, make sure all income is included, and keep supporting records.

It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K. You must report on your income tax return all income you receive from your business. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments. Business income is generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return. In addition

  • Check your payment card receipt records and merchant statements to confirm that the amount on your Form 1099-K is accurate
  • Review your records to ensure your gross receipts are accurate and reported correctly on your income tax return
  • Determine whether you have reported income from all forms of payment received, including cash, checks, and debit, credit and stored-value card transactions.
  • Maintain documentation to support both the income and deductions you report on your income tax return

More specifically, Form 1099-K helps you calculate your income and net income so that you neither overreport nor underreport when filing your tax return. At the same time, the IRS can also use Form 1099-K to compare it against what you reported. For example, if your 1099-K shows hundreds of thousands of dollars but you report only a few hundred dollars of income, that is obviously going to raise a red flag. Also, if you have business activity, you still need to report the income properly even if you did not receive a 1099-K because you did not meet the transaction or dollar thresholds.

Investment Activity

The IRS does not explicitly discuss this point above, but you can infer it from the nature of Form 1099-K itself. A common example is using PayPal to trade cryptocurrency or other virtual currency. If the number of transactions is high and the total amount is large, that may also trigger a PayPal 1099-K. But clearly, investment income is taxed differently from business income, so it should be reported more like stock investing. In that case, the 1099-K is still only a form that helps you calculate the numbers. In theory, all cryptocurrency-related transactions should be included to calculate capital gain/loss. And if you lost money, that may be usable for tax purposes as well.

When You Do Not Need to Report Tax

If all of the income shown on your 1099-K is nontaxable, then you do not need to separately pay tax just because you received a 1099-K. What are some common examples of nontaxable income? Here are a few:

  • Cash back: Cash back can generally be viewed as a discount or price adjustment from a merchant after a purchase, so it is not taxable. Therefore, cash back sent to you through PayPal by many cashback websites is nontaxable and does not need to be reported as taxable income
  • Rebates: When you buy certain products, some merchants may send you a rebate, possibly through PayPal. These are also considered purchase discounts from the merchant and are not taxable
  • Selling used items: If you are simply selling some of your own unused belongings and not doing it for profit, you generally do not owe tax on that money. Of course, if you sell at a loss, that does not count as a tax-deductible loss either.

Therefore, even if your 1099-K includes these amounts, you do not need to do anything with that portion when filing your taxes, and you do not need to mail the 1099-K together with your tax return. You only need to keep the 1099-K for your records. It is also best to save screenshots and other documentation from cashback websites or sales of used items, so that if the IRS ever asks questions later, you have legitimate supporting evidence.

Generally speaking, only residents of a few states receive tax forms from PayPal even when the number of transactions and total dollar amount are relatively small, which we will discuss below. The general rule is still $20,000/200 transactions. In most cases, the total number and amount of transactions from cashback websites, cashback, and sales of used items will not exceed $20,000 and 200 transactions. But if you do exceed those thresholds, it may be harder to claim that the used-item sales were not for profit. Use your own judgment here, and keep good records.

Does Receiving a 1099-K Affect Your US Immigration Status?

As explained above, 1099-K is only a reporting form. The real issue is whether your underlying activity violates the requirements of your nonimmigrant visa. Nonimmigrant visas such as F and J generally do not allow you to engage in business activities, and OPT only allows work related to your field of study. So if you engaged in business activity, received a 1099-K, and did not report taxes, the IRS could potentially review your return and impose penalties.

However, as to whether a 1099-K directly affects your green card or nonimmigrant visa status, there is no direct relationship. After all, the IRS mainly deals with whether income is taxable and properly reported. That said, some people do say tax issues may be reviewed in green card cases, so if you have concerns in this area, it is worth thinking carefully about them.

To repeat: if your nontaxable income triggered a 1099-K, you do not need to worry about immigration status issues. Just keep good records. There is no need to report it on your tax return.

PayPal 1099-K Issuance Rules

Many people's 1099-K forms come from PayPal. PayPal's rules for issuing 1099-K forms vary by state, so pay special attention. The current rules are as follows

  • Vermont, Massachusetts, Virginia, and Maryland: $600 USD in gross payment volume from sales of goods or services in a single calendar year regardless of the number of transactions. In other words, only the annual total matters once it reaches $600, and only goods or services are counted.
  • Illinois: $1,000 USD in gross payment volume from sales of goods or services in a single calendar year with at least 3 payment processed. That means $1,000 and more than 3 transactions, and only goods or services are counted.
  • Other states: issued when over $20,000 and more than 200 transactions, and only goods or services are counted.

Generally, goods and services means things like selling items on eBay or receiving money through PayPal using the goods option. Money sent between friends usually goes through family and friend, which is generally not counted. Payouts from cashback websites are a bit tricky and may be included. If you want to avoid the hassle of a 1099-K, and you live in one of the special states listed above, it may be better not to use PayPal to receive cashback-site payouts. Choosing something like an Amazon gift card is usually enough. Of course, as we said earlier, even if you receive a 1099-K, that does not necessarily mean you owe tax or need to report it. The key factor is still whether the income is taxable.

If you are not sure whether you have a 1099-K this year, you can log in to your PayPal account and check:

What If a 1099-K Was Issued by Mistake?

Whether the amount, name, or SSN is incorrect, or whether the form should never have been issued to you in the first place, the best approach is to contact the issuer, namely the Payment Settlement Entity (PSE).

  • If the Form 1099-K does not belong to you, contact the Payment Settlement Entity (PSE) listed on the Form 1099-K to try determine why you received the document.  The name and telephone number should be shown in the lower-left part on the form.  If a PSE name and number are not shown, contact the Filer at the number shown in the upper-left corner on the form.  Retain any correspondence with the PSE
  • If there is an error on the form, request a corrected Form 1099-K from the PSE.  Keep a copy of any corrected Form 1099-K you receive with your records as well as any correspondence with the PSE

For example, if you received a PayPal 1099-K that you should not have received, you can ask PayPal to cancel it, but make sure you understand the rules first.

Important Note

This article is compiled solely based on the original IRS materials and general tax-filing knowledge, and is for reference only. If you have tax-related questions, please consult a qualified tax professional. Thank you.

If you think there are any errors in this article, please let us know. More discussion is always welcome.