# Form 1099-K in 2026: The $20,000 Threshold Is Back, but Your Income Is Still Taxable

- Link: https://hamtock.com/form-1099-k-20000-threshold-2026/
- Published: 2026-11-03T09:18:54-05:00
- Author: HAMTOCK Consulting

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](https://hamtock.com/1099-nec-2000-threshold-small-business/)
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](https://hamtock.com/what-we-do/accounting-bookkeeping/)
   to keep platform sales, fees and sales tax organized all year
 * [Tax planning and preparation](https://hamtock.com/what-we-do/tax-planning/) 
   for sole proprietors, LLCs and small corporations
 * [Payroll](https://hamtock.com/what-we-do/payroll/) and contractor reporting, 
   including Forms 1099-NEC

**Book a consultation today.** Call [240-432-2749](https://hamtock.com/form-1099-k-20000-threshold-2026/2404322749)
or email [contact@hamtock.com](https://hamtock.com/form-1099-k-20000-threshold-2026/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._