Form 1099-K for 2026: the $20,000 and 200 transaction test is back

Who gets a Form 1099-K for 2026?

Two kinds of companies file Form 1099-K, and they follow different rules.

The app or marketplace test needs both numbers. $25,000 across 150 sales does not trigger a federal form, and neither does $8,000 across 900 sales.

The One Big Beautiful Bill Act (P.L. 119-21), which the IRS now also calls the Working Families Tax Cuts, restored the $20,000 and 200 test retroactively, as if the American Rescue Plan Act's lower threshold had never passed. If you read that a much lower federal threshold would apply to 2026, that rule is gone.

Two things stay true either way:

• A platform may still send you a form below the threshold.
• Your business income is taxable whether or not a form arrives.

Issuers must furnish 2026 forms by January 31, 2027. That is a Sunday, so the deadline is Monday, February 1, 2027.

Which states report below $20,000?

A few states require platforms to report their residents at a lower amount, with no 200 transaction count. These three are confirmed from their own tax department or statute:

Vermont's law points to the same federal limit as Virginia's (section 6041(a) of the tax code), which is why Vermont now says $2,000 and not the $600 older articles quote. Virginia's statute names no dollar figure, so check Virginia Tax for the amount it applies to 2026. If you live in one of these states, expect a form even in a small year.

Why your 1099-K never matches your sales

The IRS instructions define the box 1a gross amount as the year's transactions "without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, shipping amounts, or any other amounts." So the form differs from your deposits for these reasons:

• Refunds and chargebacks. The original sale stays in box 1a. The refund is not subtracted.
• Fees. The platform keeps its fee before paying you, but box 1a is counted before fees.
• Shipping, and sales tax if the platform counts it in your sales.
• Tips customers paid through the platform. From 2026, box 1c shows the cash tips included in box 1a.
• Personal payments tagged as goods and services by mistake, such as a friend repaying dinner or a roommate's share of rent. The IRS says these should not be on a 1099-K and are not taxable income.

Worked example: reconciling a 1099-K to the books

Say a candle maker sells through an online marketplace. Her 2026 Form 1099-K shows $48,300 in box 1a. Her bank shows $45,640 of payouts from the marketplace for the year. The marketplace's annual report explains the gap:

The arithmetic: $48,300 minus $1,210 is $47,090, and $47,090 minus $1,450 is $45,640.

Her books record the same three lines: $48,300 of sales, $1,210 of refunds against sales, and $1,450 of fees as an expense. Gross sales tie to box 1a and the payouts tie to the bank. On Schedule C, gross receipts start at $48,300, the refunds come off as returns and allowances, and the fees are an expense. The IRS says fees and refunds are not taxable income, so this costs her nothing.

The mistake is recording only the $45,640 of payouts as sales. Her return then shows $2,660 less income than the form the IRS received, and she has to explain a gap that is really her own fees and refunds.

If her form had said $48,800 instead, and the extra $500 was a friend paying her back for concert tickets through the same account, that $500 is not income. That is a wrong form, covered next.

What to do if your 1099-K is wrong

1. Contact the issuer immediately and ask for a corrected form. Wrong name or taxpayer number, personal payments, sales that belong to someone else.
2. Do not wait to file. The IRS says to file even if a corrected form never comes.
3. Back out the error the way the IRS says. An amount from an incorrect form, and personal items sold at a loss, go in the entry space at the top of Schedule 1 (Form 1040), so the form is accounted for without being taxed.
4. Report a personal item sold at a gain on Form 8949 and Schedule D. A loss on a personal item is not deductible.
5. Keep the correspondence with your records.

How the 1099-K and the 1099-NEC fit together

If you pay a contractor by card or through a payment app, leave that payment off the 1099-NEC you send them. The IRS instructions say payments made with a credit card or payment card, and third party network transactions, are reported on Form 1099-K by the payment settlement entity and are not subject to reporting on Form 1099-NEC or 1099-MISC. Only what you paid by check, bank transfer or cash counts toward the 1099-NEC threshold, which is $2,000 for payments made in 2026. The 1099-NEC threshold post has the rest.

Flip it around when you are the contractor. A client who paid you through an app or by card may send no 1099-NEC, because those payments belong on a 1099-K. Report that income once.

What to do before your 2026 form arrives

1. Download each platform's 2026 sales report as soon as the year closes: gross sales, refunds and fees.
2. Book sales at gross, with refunds and fees on their own lines, never net payouts as sales.
3. Reconcile every payout to the bank statement. In BooksGPT, bank reconciliation has you tick each line the statement cleared and finish at a $0.00 difference, so the deposit line of the table above is already proved.
4. Mark personal payments in payment apps as personal when you send or receive them.
5. When the form arrives, by February 1, 2027, tie box 1a to your gross sales and ask the issuer to fix anything that does not belong.
6. Report all your business income, form or no form. The year end bookkeeping checklist covers the rest of January.