If your business takes payments through PayPal, Venmo, Cash App, Square, Stripe, Etsy, eBay or a similar platform, you have probably heard three different stories about Form 1099-K in the last few years. The reporting threshold was supposed to drop from $20,000 to $600. Then the IRS delayed it, phased it down to $5,000 for 2024 and $2,500 for 2025, and planned $600 for 2026. Then Congress changed the rules again.
Here is where things stand for the 2026 tax year, what it means for the forms you will receive in early 2027, and what Maryland small business owners should do now so tax season goes smoothly.
What changed: the $20,000 and 200-transaction test is back
The One Big Beautiful Bill Act, signed in July 2025, reinstated the original federal threshold for third-party settlement organizations (payment apps and online marketplaces). A platform only has to send you a federal Form 1099-K when, in a calendar year, you received more than $20,000 in gross payments and more than 200 transactions. Both tests must be met.
The phase-down to $5,000, $2,500 and $600 no longer applies. For many sole proprietors, side businesses and small online sellers, that means no federal 1099-K for 2026 at all.
What did not change: the income is still taxable
This is the part that gets lost. The 1099-K threshold is a reporting rule for the payment platform. It has nothing to do with whether your income is taxable. Every dollar of business income is reportable on your return, whether you receive a 1099-K, a 1099-NEC, or no form at all.
The IRS also receives its own data from banks and payment processors, and it matches that data against returns. Leaving income off because “I didn’t get a form” is one of the most common reasons small businesses receive IRS notices.
Card payments are a different story
The $20,000 / 200 threshold applies to payment apps and marketplaces. If you accept credit and debit cards through a merchant processor, those payment card transactions are reported on Form 1099-K regardless of the amount. Many Square and Stripe users fall into this group, so do not assume you will not get a form just because your volume is under $20,000.
Maryland and other state thresholds
Some states set their own, lower 1099-K reporting thresholds, and Maryland is among the states that have used a $600 threshold for state reporting. That means a Maryland seller could still receive a 1099-K, or have the platform report to the state, even when the federal test is not met. Treat any 1099-K you receive as information to reconcile, not as a surprise.
Maryland also taxes your business income through your state return and local income tax, so accurate federal numbers flow straight through to what you owe the Comptroller.
Personal payments are not business income
Money a friend sends you to split a dinner bill, or a family member reimbursing you for a gift, is not taxable income. The best protection is to keep personal and business payments separate:
- Use a dedicated business account on each payment app, linked to your business bank account.
- Ask customers to pay you through the business profile, and use “goods and services” for sales.
- Do not run personal reimbursements through the business account.
If personal payments do end up on a 1099-K, you can report and back them out on your return, but it takes more documentation and invites questions.
Why the 1099-K number rarely matches your books
Form 1099-K reports gross payments. It does not subtract:
- Platform and processing fees
- Refunds and chargebacks
- Shipping charges you collected and paid out
- Sales tax collected (Maryland’s 6% sales tax on taxable goods)
Your bookkeeping should record gross sales and then show fees, refunds and sales tax as separate lines. When the 1099-K arrives, you should be able to tie its total to your records with a simple reconciliation. If you cannot, find out why before you file.
Paying contractors through apps or cards? Watch for double reporting
Our recent post on the new $2,000 Form 1099-NEC threshold covered contractor reporting. One related rule: if you pay a contractor by credit card or through a payment app’s goods and services option, the platform is responsible for any 1099-K reporting, and you generally do not also issue a 1099-NEC for those payments. Payments by check, ACH or bank transfer stay on your 1099-NEC list. Mark the payment method on each vendor record now so your January filing is correct.
Your year-end 1099-K checklist
- Log in to each platform and confirm your business name, address and taxpayer identification number (EIN or SSN) are current. Missing or wrong TINs can trigger 24% backup withholding.
- Download 2026 transaction reports from every app and marketplace you use, even if you expect no form.
- Reconcile platform deposits to your bank account and books each month through December.
- Separate personal transactions and document them.
- Record fees, refunds and sales tax on their own lines, not netted against sales.
- Watch for forms in late January and early February 2027, and compare them to your records as soon as they arrive.
How HAMTOCK Consulting can help
Payment apps make it easy to get paid and hard to keep clean books. Our team can connect your platform reports to your accounting system, reconcile your 1099-K and bank deposits, separate personal activity, and make sure your federal and Maryland returns report the right income, no more and no less.
- Accounting and bookkeeping to keep platform sales, fees and sales tax organized all year
- Tax planning and preparation for sole proprietors, LLCs and small corporations
- Payroll and contractor reporting, including Forms 1099-NEC
Book a consultation today. Call 240-432-2749 or email contact@hamtock.com. We reply to consultation requests within one business day.
This article is for general information only and is not tax or legal advice. Rules and thresholds can change, and your situation may differ. Please talk with a qualified professional before acting on it.
