The IRS has recently released guidance for hobby enthusiasts receiving a 1099-K.
Why did I receive the 1099-K?
Per the IRS, "Form 1099-K is a report of payments you got during the year from:
- Credit, debit, or stored value cards such as gift cards (payment cards)
- Payment apps or online marketplaces (third-party payment networks)
Third-party payment networks are required to file Form 1099-K with the IRS and provide a copy to you when the gross payment amount is more than $5,000 for tax year 2024, or $20,000 for tax year 2025 and 2023. Form 1099-K should not report gifts or reimbursement of personal expenses you received from friends and family."
Program Entry
- Federal Section
- Income (Select my forms)
- Less Common Income
- Other Income
- From the dropdown description menu, select "Other Income" then enter "Hobby Income" for the box labeled Description of other income.
- Enter the amount of income, then press continue to save your entry
What if the income reported on my 1099-K shouldn't be taxed?
If you received a 1099-K in error, contact the issuer of the form immediately and request that it be corrected. Keep a copy of the original form and all correspondence with the issuer for your records. If you cannot have your 1099-K corrected, follow the instructions below to report your 1099-K received in error.
- Federal Section
- Income (Select my forms)
- Less Common Income
- Other Income
- From the dropdown description menu, select "Other Income" then enter "1099-K received in error" for the box labeled Description of other income.
- Enter the amount of income, then press continue to save your entry
You will then need to make another entry to remove the income from the return. Please follow these steps to remove the income from the return per IRS guidelines.
- Federal Section
- Deductions
- Select my forms
- Adjustments to Income
- Other Adjustments
- Other Adjustments Not Listed Above
- Enter the Description as 1099K received in error
- Enter the amount that should not be considered income on the 1099-K
Once done, you should have your 1099-K income reported as a positive and negative amount of other income. This will allow the entries to cancel each other out, resulting in the income being reported but not taxed.
How do I know if my pastime is a hobby or business?
Please take a look at the questions here to determine if your pastime is a hobby or business.