Taxes
Venmo, PayPal and Form 1099-K: What Small Businesses Need to Know
3 min read
If customers pay you through Venmo, PayPal, Cash App, Square or Stripe, you've probably wondered about Form 1099-K. The rules changed several times in recent years, so here's the current picture.
What is Form 1099-K?
Form 1099-K is issued by payment card companies and third-party payment platforms to report the gross payments they processed for you during the year. A copy goes to the IRS.
The current threshold
After years of planned changes, the 2025 tax law restored the original threshold. A payment platform is required to issue a 1099-K when you receive more than $20,000 in gross payments and more than 200 transactions in a calendar year.
Many platforms may still send forms below that threshold, and card processors report regardless of amount, so don't be surprised to receive one.
The most important point: all business income is taxable
The threshold only controls whether a form is issued. It does not change what's taxable. If you received $8,000 for business services through Venmo, that's business income, whether or not you get a 1099-K.
Common 1099-K problems
Gross amounts include things that aren't income
The form reports gross payments, before fees, refunds and chargebacks. It may also include:
- Personal reimbursements, like splitting dinner with friends
- Sales tax you collected
- Refunds you issued
Your books need to reconcile the 1099-K total to your actual income so you report correctly.
Personal and business payments mixed together
If you use one personal Venmo account for both personal and business payments, separating them is time-consuming. Use a business profile or separate business account on payment apps.
Double counting
If a customer pays a contractor through PayPal, that payment is reported on a 1099-K, so the customer shouldn't also issue a 1099-NEC for it.
How to handle payment app income in your books
- Use a business account on each payment platform
- Connect the platform (or the bank account it deposits into) to your bookkeeping software
- Record gross sales, with processing fees as an expense
- Transfer balances to your business bank account regularly
- At year-end, reconcile any 1099-K you receive to your recorded sales
What about Washington?
Payments received through apps are part of your gross receipts for Washington B&O tax and, if applicable, sales tax. The payment method doesn't change your state obligations.
The bottom line
The 1099-K threshold is back to $20,000 and 200 transactions, but every dollar of business income is still taxable. Keep business and personal app accounts separate, record processing fees as expenses, and reconcile any 1099-K you receive to your books.
Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.
This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.