A Form 1099-K is an informational tax form issued by payment settlement entities — meaning payment processors like Stripe, PayPal, and Square — to report gross payment volume processed through their platforms. It gets sent to you and to the IRS.

The key word is "gross." The 1099-K reflects the total amount of payments processed before any fees, refunds, or other deductions. This often surprises business owners who assume the form will show their net earnings. It doesn't. You'll need to account for those fees and refunds separately on your tax return.

There has been significant confusion around 1099-K reporting thresholds over the past few years, as the IRS repeatedly proposed lowering the threshold from the longstanding standard and then delayed implementation.

For tax year 2025, the rules have been clarified under the One Big Beautiful Bill Act (OBBBA). The IRS reinstated the longstanding threshold for third-party settlement organizations (TPSOs) like PayPal and Stripe:

You'll receive a 1099-K if you exceed both:

More than $20,000 in gross payments, AND More than 200 transactions Both thresholds must be met. Exceed one but not the other, and no form is required from that platform (though some platforms may still issue one voluntarily or to meet state requirements).

Important exception: If you accept payment via credit or debit card directly through a merchant acquirer — the bank or processor that handles your card terminal — that entity is required to issue a 1099-K regardless of dollar amount. There is no transaction minimum for traditional card processing.

State thresholds are often lower. Several states require 1099-K reporting at much lower thresholds. Massachusetts, Vermont, Virginia, Maryland, and the District of Columbia require 1099-K forms at $600 or more. Illinois and Missouri have their own thresholds. If you operate in one of these states, check the requirements for your specific state.

This is a nuance that confuses a lot of people: the $20,000/200-transaction threshold applies to each platform separately, not to your total across all platforms.

If you process $12,000 through PayPal and $10,000 through Stripe, neither platform is required to issue you a 1099-K (assuming fewer than 200 transactions on each). But you still owe taxes on that $22,000 in income. The absence of a 1099-K is not a green light to skip reporting.

Nothing, from a tax obligation standpoint. You are still legally required to report all business income regardless of whether you receive any informational forms. The 1099-K is an IRS tool for catching underreported income — it's not a threshold below which your income becomes tax-free.

If you're a sole proprietor, all business income goes on Schedule C of your Form 1040. If you're an LLC taxed as a sole proprietorship, same story. If your LLC has elected S-corp or C-corp status, your reporting structure will differ — but the fundamental point stands: income earned is income reported.

Here's the thing that catches a lot of solopreneurs off guard: it's not just income tax you owe on your business earnings. You also owe self-employment (SE) tax.

Self-employment tax covers Social Security and Medicare contributions that would normally be split between an employer and employee. As a solopreneur, you're both — so you pay the full rate. For 2025, the self-employment tax rate is 15.3% on net earnings up to $176,100 (this is the combined 12.4% Social Security rate and 2.9% Medicare rate). Earnings above that threshold still incur the 2.9% Medicare portion.

The saving grace: you can deduct 50% of self-employment taxes paid as an adjustment to income on your federal return. It's not a deduction against your business income, but it reduces your adjusted gross income — which lowers your overall tax bill.

Stripe issues 1099-K forms and sends them via mail and through your Stripe Dashboard. Log in to your Stripe account, navigate to Tax Forms, and you can download your 1099-K directly. Stripe reports gross charge volume — meaning refunds and Stripe processing fees are not netted out. You'll need to account for these separately in your bookkeeping.

PayPal issues 1099-K forms for amounts exceeding the federal and applicable state thresholds. You can access your form through the PayPal website under Statements & Tax Documents. Note: personal PayPal transfers (money from friends and family) are not reported — only payments categorized as goods and services. This distinction matters if you receive any personal payments through PayPal, which is why keeping business PayPal activity clearly coded as business is critical.

Square follows the same federal thresholds for 1099-K issuance but reports separately for certain states (Illinois, Missouri, Massachusetts, and others) at lower thresholds. Your 1099-K is available in your Square Dashboard under Account & Settings > Tax Forms. Like Stripe, Square reports gross volume before fees.

Don't panic if the number looks higher than expected. Remember, it's gross volume — not your profit, and not what you actually deposited into your bank account after fees.

When preparing your taxes, you'll need to:

1. Note the gross amount on the 1099-K 2. Identify all processing fees charged by the platform (these are deductible business expenses) 3. Identify all refunds issued (these reduce your reportable income) 4. Record all income that didn't come through the platform — the 1099-K only covers one income stream The income reported on your 1099-K should be part of your total gross business income on Schedule C. If the IRS receives a 1099-K showing $25,000 in payments and your Schedule C shows $18,000 in gross receipts, that mismatch will likely trigger a notice.

Because payment platforms don't withhold taxes from your earnings, you're responsible for paying taxes as you go. The IRS operates on a "pay-as-you-go" system, and if you owe more than $1,000 in taxes when you file, you may face underpayment penalties.

Estimated tax due dates for 2025:

April 15, 2025 (Q1: January–March) June 16, 2025 (Q2: April–June) September 15, 2025 (Q3: July–September) January 15, 2026 (Q4: October–December) A simple approach: set aside 25–30% of every payment you receive into a separate savings account. Pay estimated taxes quarterly using the IRS's Electronic Federal Tax Payment System (EFTPS) or through IRS Direct Pay. Your state likely has its own estimated payment system as well.

Using Stripe, PayPal, or Square is perfectly fine and totally normal for a modern small business. But you need to understand what these platforms report to the IRS, how gross volume differs from net income, and why your tax obligations exist independently of what any form says.

Stay organized, set aside for taxes as you go, and you'll never have an unpleasant surprise in April.

The final guide in this series pulls it all together: How to Set Up Bookkeeping as a Solopreneur — a practical system for keeping clean books without becoming an accountant.

The 1099-K is one of several forms in the 1099 family. Clean reconciliation depends on a separate business account and bookkeeping that tracks gross, fees, and refunds as distinct lines.