In This Article
- What Is a 1099-K and Why Did You Get One?
- Choose Your Scenario: Three Paths, Three Different Tax Outcomes
- Scenario A: You Sold Personal Items at a Loss
- Scenario B: You Have a Hobby, Not a Business
- Scenario C: You Are a Business Reseller
- Reconciling Form 1099-K Gross Amounts With the Books
- Platform-Specific Notes for Sellers
- New Jersey-Specific Rules
- Frequently Asked Questions
- How to Request an Intake Review
The number on Form 1099-K is not the tax owed, taxable income, or profit by itself. It is a gross payment amount that must be reconciled with the actual payment flow, fees, refunds, shipping, cost of goods, marketplace-collected tax, books, and transaction character.
Take a breath. I am going to walk you through this step by step.
What Is a 1099-K and Why Did You Get One?
Form 1099-K is an information return that payment settlement entities (PSEs) use to report payment transactions for goods or services to the IRS. If you sold items on eBay, Poshmark, Mercari, Depop, StockX, Etsy, Facebook Marketplace, or received payments through PayPal, Venmo, or Cash App for goods and services, the platform may be required to report those gross payments.
The 2026 Federal TPSO Threshold: More Than $20,000 AND More Than 200 Transactions
After years of confusion, Congress settled this. The One Big Beautiful Bill Act (OBBBA, Public Law 119-21, Section 70432), signed July 4, 2025, restored the federal mandatory Form 1099-K threshold for third-party-network (TPSO) transactions to more than $20,000 in gross payments AND more than 200 transactions. Payment-card merchant acquirers have no federal de-minimis threshold, and a TPSO may furnish a form below its mandatory threshold. This killed the $600 ARPA TPSO threshold retroactively, as if it never existed.
For a TPSO payment flow, the mandatory threshold applies to that issuer's transactions rather than being combined across unrelated platforms. A seller with $15,000 on eBay and $10,000 on Poshmark may not meet either TPSO's mandatory threshold, but an actual form can still depend on the issuer, payment flow, and tax-document policy.
If You're Below $20,000, Why Did You Still Get a 1099-K?
Three possible reasons:
- Your state has a lower threshold.
- Payment-card transactions have no federal de-minimis threshold. If buyers pay by credit or debit card through your merchant account rather than a TPSO/app, the $20,000-and-200-transaction TPSO exception does not apply. Whether and how a particular form is furnished still depends on the merchant-acquirer relationship, covered transactions, corrections, backup withholding, and the current instructions.
- Backup withholding was applied. If you failed to provide or verify your TIN, the platform may have issued a 1099-K regardless of amount.
New Jersey's Payer-Copy Rule Can Differ From the Federal TPSO Rule
Several states set their own payer-copy thresholds, and those rules change. New Jersey's rule is below; for any other state, confirm the current payer-copy threshold with that state's tax agency.
| State | Threshold | Transaction Min |
|---|---|---|
| New Jersey | $1,000 | None |
For New Jersey, NJ-WT's $1,000-or-withholding condition is a payer state-copy filing duty; it does not by itself guarantee that a recipient receives a Form 1099-K. Confirm the issuer, payment flow, tax year, and document actually furnished before drawing a reporting conclusion.
Zelle Transfers and Form 1099-K
Zelle's published model describes bank-to-bank payment messaging rather than a third-party settlement organization furnishing Form 1099-K for transfers on that network. Verify the actual payer, settlement flow, account records, and any form furnished for the year. Taxability follows the underlying transaction, not the payment label or the presence of a form.
Choose Your Scenario: Three Paths, Three Different Tax Outcomes
The right way to handle your 1099-K depends entirely on what you were selling and why. Here are the three scenarios.
Scenario A: You Sold Personal Items at a Loss
The situation: You cleaned out your closet and sold used clothing, furniture, electronics, or other personal items for less than you originally paid. You received a 1099-K showing the gross payments.
Taxable gain from the stated sale: $0. A supported sale of personal-use property below adjusted basis produces no taxable gain, while the personal loss is not deductible. This transaction-level result does not state the tax due on the complete return, and any furnished 1099-K still must be reconciled under the current instructions.
How to Report: The Dedicated Schedule 1 Entry
For 2024 and 2025 returns, Schedule 1 (Form 1040) has a dedicated entry at the top for Form 1099-K amounts reported in error or for personal items sold at a loss. Use the form and instructions for the filing year:
- Top-of-form entry: Enter the applicable reported proceeds amount (e.g., $2,000)
- Remaining Form 1099-K amounts: Report elsewhere on the return according to the transaction type; do not duplicate the same proceeds in the old Line 8z/24z offset
- Net effect on your AGI: $0
Enter the applicable reported proceeds, not the original cost. If the Form 1099-K covers a couch bought for $800 and sold for $200, enter $200 in the dedicated top entry. The personal loss is not deductible, and this entry prevents those proceeds from being treated as taxable income. Keep records supporting the original cost and sale.
Alternative method: Form 8949 with code "L" in column (f) can report a nondeductible loss on personal property, flowing to Schedule D, when that treatment and the current instructions apply. Use the applicable reporting method consistently with the transaction facts and return instructions.
Scenario B: You Have a Hobby, Not a Business
The situation: You sell occasionally on Poshmark or eBay for fun. You are not trying to build a business. You sometimes make a small profit, but it is not your livelihood.
IRC Section 183 governs activities not engaged in for profit. Profit motive turns on nine non-exclusive factors in Treas. Reg. Section 1.183-2(b), with no controlling factor or numerical majority. This inquiry does not by itself establish a Section 162 trade or business or Schedule C treatment. If your activity is not engaged in for profit, here is how taxes work:
Ordinary Hobby Income Goes on Schedule 1, Part I, Line 8j (Tax Year 2025)
For tax year 2025, report activity-not-engaged-in-for-profit income on Schedule 1, Part I, Line 8j. Gains from selling items held in a hobby collection, such as stamps or coins, are instead capital gains reported on Form 8949 and Schedule D (a loss on those items is not deductible). Use the form and instructions for the filing year. If cost of goods sold applies, report gross receipts reduced by COGS; for example, $3,000 of sales minus $2,000 of COGS leaves $1,000 of hobby income.
The COGS exception matters. Cost of goods sold is not technically a "deduction" but rather a calculation to arrive at gross income under IRC Section 61(a)(2). Even hobby sellers can offset gross receipts by the cost of the items they sold.
Most Hobby Expenses Are Permanently Nondeductible
This is where the bad news hits. The TCJA suspended all miscellaneous itemized deductions subject to the 2% AGI floor, and the OBBBA made that disallowance permanent - it now sits at IRC Section 67(h) (Section 70110 redesignated former Section 67(g)). Platform fees, shipping costs, packaging, mileage, and other hobby operating expenses are completely nondeductible under current law; the cost of the items you sold (COGS, above) still reduces hobby income, and deductions allowed whether or not an activity is for profit, such as qualifying property taxes, keep their own rules. That is the rule as enacted today; a future Congress could change it, so verify before relying on pre-2018 internet guides suggesting you can deduct hobby expenses.
No Self-Employment Tax on Hobby Income
The silver lining: for tax year 2025, hobby income reported on Schedule 1, Part I, Line 8j is subject to ordinary income tax but not the 15.3% self-employment tax. IRC Section 1402(a) defines self-employment earnings as income from a "trade or business," and hobbies fail that definition.
When Does a Hobby Become a Business?
If gross income exceeds attributable deductions in 3 of 5 consecutive years, IRC Section 183(d) creates a rebuttable presumption only that the activity is engaged in for profit unless the IRS establishes otherwise. It is not a safe harbor: failure creates no contrary hobby presumption, and meeting it does not by itself establish trade-or-business status or Schedule C treatment. Businesslike records, time, dependence on income, operational changes, continuity, and regularity must be evaluated under the applicable facts-and-circumstances standards.
Scenario C: You Are a Business Reseller
The situation: You regularly source inventory from thrift stores, estate sales, clearance racks, or wholesale lots and resell for profit on one or more platforms. You track costs, manage inventory, and treat this as a business.
When the facts establish an active resale trade or business run as a sole proprietorship or single-member LLC taxed as a disregarded entity, report supported business receipts and allowable costs under the applicable Schedule C, inventory, capitalization, and timing rules; a partnership or corporation reports on its own return. Self-employment tax applies only to net earnings computed under Schedule SE, and the complete return determines tax due.
Schedule C Walkthrough for Resellers
Part I, Line 1 (Gross Receipts): Reconcile each actual Form 1099-K and its covered payment flow to the books, platform ledgers, refunds, sales tax, fees, deposits, personal or nominee items, and sales not covered by a form. Report supported business gross receipts without simply summing duplicate or nonbusiness form amounts; use the current Schedule C instructions and the taxpayer's accounting method.
Part I, Line 2 (Returns and Allowances): Deduct refunds and returns you issued to buyers.
Part I, Line 4 (COGS): Enter supported cost of goods sold from Part III, Line 42. The amount depends on inventory, purchases, returns, freight, accounting method, and the applicable COGS rules.
Part II (Expenses): Classify supported platform fees, shipping, supplies, vehicle costs, home-office costs, and advertising from the actual expenditure and the filing-year instructions. The platform or expense label alone does not determine the Schedule C line, capitalization, allocation, or deduction.
Part III (Cost of Goods Sold): Complete the filing-year inventory and cost computation, including beginning inventory, eligible purchases, labor, materials and other includible costs, and ending inventory under the permitted method; do not treat purchases alone as the complete formula.
Line 31 (Net Profit): Supported Schedule C net profit feeds the federal income-tax computation and the separate Schedule SE calculation. Schedule SE line 4c, other wages, the Social Security wage base, Additional Medicare Tax, adjustments, credits, and the complete return determine the tax effect.
Self-Employment Tax Applies to Business Resellers
Your net profit is subject to 15.3% SE tax (12.4% Social Security on the first $184,500 of combined wages/SE income for 2026, plus 2.9% Medicare with no cap). The SE tax base is 92.35% of net profit (IRC Section 1402(a)(12)). Half of SE tax is deductible above the line on Schedule 1, Line 15.
With no other wages or self-employment income, SE tax at $15,000 of net profit is approximately $2,119; at $50,000, approximately $7,065. Use the SE tax calculator to run your numbers.
Business Costs Require Classification and Support
These are selected business cost categories, with illustrative filing-year line references rather than universal assignments. Hobby sellers may still recover the supported cost of items sold; that is distinct from deducting business operating and selling expenses.
| Expense | Schedule C Line | Notes |
|---|---|---|
| Inventory and cost of goods sold | Part III under the applicable inventory method | Classify from actual purchases, beginning and ending inventory, and permitted method |
| Platform selling fees | Line 10 (Commissions and fees) | eBay, Poshmark, Mercari, etc. |
| Payment processing fees | Line 10 or Line 27b | Stripe, PayPal, Depop Payments |
| Shipping costs | Line 27b (Other expenses) | Postage, labels, packaging |
| Mileage (sourcing, post office) | Line 9 (Car/truck expenses) | 72.5 cents/mile Jan-Jun 2026; 76 cents/mile Jul-Dec 2026; trips from home count only under the Rev. Rul. 99-7 rules, for example when home is your principal place of business |
| Home office | Line 30 | Simplified: $5/sq ft, max $1,500 |
| Supplies (boxes, tape, hangers) | Line 22 | Packaging and listing supplies |
| Photography equipment | Line 13 (Depreciation) | Ring light, camera, backdrop |
| Software (Vendoo, List Perfectly) | Line 27b | Crosslisting and inventory tools |
| Internet (business portion) | Line 25 (Utilities) | Document business-use percentage |
| Storage unit rental | Line 20b (Rent) | For inventory storage |
| Advertising/Promoted Listings | Line 8 | eBay Promoted Listings, Depop Boosting |
The QBI deduction under IRC Section 199A also applies. Online reselling is not a Specified Service Trade or Business. You may deduct up to 20% of your qualified business income, after allocable deductions and subject to the taxable-income ceiling and, at higher incomes, the wage/property limits. Made permanent by OBBBA, which also added the Section 199A(i) minimum: at least $1,000 of aggregate active QBI yields a deduction of no less than $400 (indexed after 2026). Report on Form 8995 or 8995-A.
Quarterly Estimated Tax Payments
If you expect to owe $1,000 or more in federal tax, estimated payments may be required under IRC Section 6654. Due dates for 2026 generally are April 15, June 15, September 15, 2026 and January 15, 2027. The prior-year safe harbor generally uses prior-year AGI and rises from 100% to 110% when that AGI exceeded $150,000 ($75,000 if married filing separately); the alternative generally uses 90% of current-year tax, subject to installment, withholding, and exception rules. See the NJ quarterly estimated taxes guide.
Reconciling Form 1099-K Gross Amounts With the Books
Per the IRS Form 1099-K FAQs (General information, Q8): "The gross payment amount (Box 1a) on Form 1099-K reports the total, or gross, dollar amount of reportable payment transactions. It doesn't include adjustments for fees, credits, refunds, shipping, cash equivalents or discounts. Those items are not income. Taxpayers can deduct those items from the gross amount when including the income on their tax return."
In a stated illustration with $50,000 of gross sales, $8,000 of refunds, $5,000 of platform fees, and $4,000 of shipping, a $50,000 Box 1a amount would require reconciliation to $33,000 of net receipts before separately computing COGS and any other supported items. The illustration does not establish any platform's form composition or a taxable-profit result.
How to Reconcile Platform-Specific Form Composition
| Platform | Fees in Gross? | Shipping in Gross? | Sales Tax in Gross? | Refunds in Gross? |
|---|---|---|---|---|
| eBay | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Poshmark | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Mercari | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Depop | Verify actual filer, form, and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| StockX | Verify actual filer, form, and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Etsy | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Amazon | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Facebook Marketplace | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| PayPal/Venmo | Verify actual filer, form, and transaction tags | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Cash App | Verify actual filer, form, account, and payment flow | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
| Zelle | Verify actual payer, form, account, and payment flow | Verify actual form and ledger | Verify actual form and ledger | Verify actual form and ledger |
Platform Reconciliation Warnings
Amazon, eBay, and Etsy form composition must be reconciled separately. For each actual Form 1099-K, identify the filer and covered payment flow, then reconcile Box 1a to the platform ledger, gross sales, shipping, refunds, fees, marketplace-collected tax, settlements, and deposits. Do not infer form composition or a Schedule C line from the platform name; use the taxpayer's accounting method, books, transaction character, and current return instructions while preventing omitted receipts or duplicate deductions.
PayPal and Venmo transaction labels require reconciliation. Determine whether each transfer was a payment for goods or services or a genuinely personal transfer, and compare the issuer's transaction tags and account ledger with the actual Form 1099-K. If the form includes a transaction that should not be reported by the filer, request a correction and preserve the supporting records; form composition and substantive taxability are separate questions.
Platform-Specific Notes for Sellers
eBay
For eBay activity, identify the filer on the actual Form 1099-K and reconcile the covered payment flow to the current account reports, seller ledger, gross sales, shipping, refunds, fees, marketplace-collected tax, settlements, and deposits. Verify current commercial terms in the seller account rather than predicting the issuer or form composition from the platform name.
Poshmark
For Poshmark activity, use the current seller agreement and account reports to identify the transaction, shipping, and other charges actually incurred. Reconcile the actual filer, covered payment flow, Box 1a, refunds, fees, marketplace-collected tax, labels, settlements, and deposits rather than hard-coding a fee schedule or form composition.
Mercari
For Mercari activity, verify current seller terms and use the account reports to identify charges, shipping, cancellations, refunds, and marketplace-collected tax. Reconcile the actual filer, covered payment flow, Box 1a, settlements, and deposits; do not infer a current fee schedule or form composition from the platform name.
Depop
For Depop activity, reconcile the current seller agreement, fee ledger, payment processors, covered payment flows, deposits, refunds, and each actual Form 1099-K. Identify the filer from the form rather than assuming Stripe, Depop, PayPal, a form count, or the components included in Box 1a.
StockX
For StockX activity, use the current seller agreement and account ledger to identify transaction, processing, shipping, and other charges actually incurred. Reconcile the filer, covered payment flow, Box 1a, settlements, fees, refunds, and deposits on each actual Form 1099-K; do not infer a fee schedule, Hyperwallet issuance, payout-versus-gross composition, or tax outcome from the platform name.
Etsy
Platform fees and information-return composition can change. Use the seller statements and tax documentation actually issued for the covered period, then reconcile gross sales, refunds, fees, tax, and payouts. The e-commerce hub provides a records-first overview.
Facebook Marketplace
For Facebook Marketplace activity, use the current account terms and ledger to identify the actual payment flow, fees, filer, form, and gross amount. A local exchange, shipped order, cash payment, or named app does not by itself decide Form 1099-K treatment. Reconcile any form furnished to the underlying transactions; taxability does not depend on the form.
New Jersey-Specific Rules
NJ's $1,000 Payer State-Copy Filing Rule
NJ-WT includes a $1,000-or-withholding payer state-copy filing duty for covered Forms 1099. It does not replace the federal Form 1099-K issuer rules or guarantee that a seller receives a separate state recipient form. Confirm the actual issuer's current policy and reconcile every form that is furnished.
Reporting Resale Income on the NJ Return
For a sole proprietor or disregarded single-member LLC, business resale income flows from federal Schedule C to Schedule NJ-BUS-1, Part I ("Net Profits From Business") and then to NJ-1040, Line 18. NJ requires adjustments for depreciation (complete Worksheet GIT-DEP), does not allow the QBI deduction, and caps Section 179 at $25,000. New Jersey lets a sole proprietor deduct ordinary business meal and entertainment expenses not allowed on the federal return (Schedule NJ-BUS-1, Part I, item 4); partnerships take the same subtraction on Form NJ-1065 and S corporations on CBT-100S Schedule K, Part II, line 6d (TB-37(R)), while NJ C corporations make no adjustment. NJ estimated payments are required if liability exceeds $400 (Form NJ-1040-ES). Determine actual required installments separately under the applicable current-year and eligible prior-year methods, withholding and credits, income timing, annualization, and exceptions; the balance threshold alone does not determine an underpayment charge.
NJ Resale Certificate (Form ST-3): Qualifying Resale Purchases
A registered NJ purchaser may furnish Form ST-3 for an otherwise qualifying purchase for resale when the purchaser, seller, property, intended resale, certificate, and timing requirements are met. Registration and a Certificate of Authority do not make a personal-use or other nonqualifying purchase exempt, and a seller must evaluate the certificate under the current NJ instructions. Keep the certificate and transaction records with the inventory records.
NJ Marketplace Facilitator Law
Under NJ Technical Bulletin TB-83 and P.L. 2018, c. 132, a marketplace facilitator generally collects and remits NJ sales tax on taxable marketplace transactions for which it has the statutory collection duty. A marketplace seller should confirm the platform's role, transaction taxability, and any remaining registration or filing duties rather than treating every platform sale as covered. For direct sales, a New Jersey seller can have physical nexus without meeting an economic-nexus threshold. An out-of-state remote seller separately tests, for the current or prior calendar year, more than $100,000 of covered NJ retail sales or 200 or more covered NJ transactions involving tangible personal property, specified digital products, or taxable services. Clothing and footwear exemptions also depend on the item and facts.
Frequently Asked Questions
Do I have to pay taxes on a 1099-K?
The 1099-K itself does not determine tax. A qualifying resale business computes profit from gross receipts, cost of goods sold, and allowable expenses rather than treating the form's gross amount as taxable profit. A supported personal-item sale below adjusted basis produces no taxable gain from that transaction, but it does not establish the tax due on the complete return.
What if I didn't get a 1099-K? Do I still need to report?
The Form 1099-K threshold is an issuer-reporting rule, not an exemption or activity-classification test. Reconcile the actual receipts and report them under the applicable personal-sale, hobby, investment, or trade-or-business rules. Schedule SE generally applies when line 4c net earnings from self-employment reach $400, while the return-filing requirement and tax due depend on gross income, filing status, other filing triggers, credits, and the complete return.
What if my 1099-K is wrong or includes personal transactions?
Contact the issuer (the "Filer" field on the form) and request a corrected 1099-K. The IRS explicitly states: "Don't contact the IRS. We can't correct your Form 1099-K." If the platform will not correct it, file your return on time using the applicable current instructions. On the 2024 and 2025 Schedule 1, enter the erroneous Form 1099-K amount in the dedicated top-of-form entry; correctly report any remaining transactions elsewhere on the return.
Is money from friends and family on Venmo or PayPal taxable?
A genuinely personal transfer is not taxable income merely because it moved through Venmo or PayPal. Determine the transaction's substance, payer, recipient, account setting, issuer tag, and actual form coverage; request a corrected form when appropriate and apply the current return instructions to the documented facts rather than assuming a universal threshold tag or offset entry.
Do I owe self-employment tax on my 1099-K income?
It depends on the underlying transactions and activity. Personal items sold below adjusted basis: no taxable gain from those transactions, while the personal losses are nondeductible. Activity not engaged in for profit: income-tax treatment follows the applicable Schedule 1 and Section 183 rules, without Schedule SE solely from that classification. Qualifying resale trade or business: positive net profit can enter the regular Schedule SE computation, including the 92.35% adjustment, Social Security wage-base coordination, Medicare component, and any separate Form 8959 calculation; income tax depends on the complete return.
I sold personal items at a loss but got a 1099-K. What do I do?
For 2024 and 2025 returns, enter the applicable Form 1099-K proceeds for personal items sold at a loss in the dedicated entry at the top of Schedule 1. Net effect for those proceeds: $0 on AGI; the personal loss is not deductible. Keep basis and sale records, report any remaining transactions under their own rules, and use the instructions for the filing year.
When do I need to start making quarterly estimated tax payments?
The $1,000 federal expected-balance boundary and New Jersey's more-than-$400 expected-tax-due boundary are starting predicates, not universal payment commands. Determine any required annual payment and installments after withholding, credits, prior-year eligibility, safe harbors, annualization, payment dates, and statutory exceptions are applied under each system.
Disclaimer: This post provides general tax information and is not a substitute for personalized tax advice. Consult a qualified tax professional for advice specific to your situation.
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