Received a Form 1099-K for money earned from a hobby? You're not alone. As payment apps and online marketplaces continue to grow in popularity, more taxpayers are seeing Form 1099-K in their tax documents.
The good news is that receiving a Form 1099-K doesn't automatically mean all of the money reported is taxable. The correct tax treatment depends on why you received the payments and whether your activity qualifies as a hobby or a business.
Why Did I Receive Form 1099-K?
According to the IRS, Form 1099-K reports payments you received during the year through:
- Credit, debit, or stored-value cards, including gift cards
- Payment apps and online marketplaces (also called third-party settlement organizations or TPSOs)
Payment platforms may issue Form 1099-K when payments received for goods or services exceed applicable reporting thresholds. For tax year 2026, payment apps and online marketplaces generally must issue Form 1099-K when both of the following are true:
- You received more than $20,000 in payments for goods or services, and
- You had more than 200 transactions.
Keep in mind that some platforms may still send a Form 1099-K even if you don't meet the federal reporting threshold.
Also, personal payments from friends and family, such as gifts or reimbursements for shared expenses, generally should not be reported on Form 1099-K.
How Do I Report Hobby Income From Form 1099-K?
If the payments reported on your Form 1099-K relate to a hobby rather than a business, report the income as Other Income on your federal return.
Follow these steps:
- Go to Federal
- Select Income (Select my forms)
- Choose Less Common Income
- Select Other Income
- From the description dropdown, choose Other Income
- Enter Hobby Income as the description
- Enter the amount from your Form 1099-K that represents taxable hobby income
- Continue to save the entry
Remember, hobby income is generally taxable even if you don't receive a Form 1099-K. The form is simply an information return that helps the IRS match income reporting.
What If the Form 1099-K Was Issued in Error?
Sometimes a Form 1099-K may include amounts that aren't taxable, such as personal reimbursements or other non-business payments.
If you believe the form is incorrect:
- Contact the issuer immediately and request a corrected Form 1099-K.
- Keep copies of the original form and any correspondence for your records.
If you're unable to obtain a corrected form, you can still report the form and offset the amount on your tax return.
Step 1: Report the Form 1099-K
- Go to Federal
- Select Income (Select my forms)
- Choose Less Common Income
- Select Other Income
- Choose Other Income from the description dropdown
- Enter 1099-K received in error as the description
- Enter the amount reported on the Form 1099-K
- Continue to save the entry
Step 2: Remove the Incorrect Income
- Go to Federal
- Select Deductions
- Choose Select my forms
- Select Adjustments to Income
- Choose Other Adjustments
- Select Other Adjustments Not Listed Above
- Enter:
- Description: 1099-K received in error
- Amount: The portion of the Form 1099-K that should not be taxable
Once complete, the income and adjustment entries will offset each other. This allows the Form 1099-K amount to be reported on the return while preventing non-taxable payments from being taxed.
Is My Activity a Hobby or a Business?
The tax treatment depends on whether your activity is a hobby or a business.
In general:
- A business operates with the intent to make a profit.
- A hobby is an activity pursued primarily for recreation or personal enjoyment.
The IRS looks at several factors when determining whether an activity is a business or a hobby, including whether you're trying to earn a profit, how regularly you conduct the activity, and whether you operate in a businesslike manner.
If you're unsure, review the IRS guidance on determining whether an activity is a hobby or a business before filing your return.
Why It Matters
Correctly classifying your activity is important because:
- Business income is generally reported on Schedule C and may be subject to self-employment tax.
- Hobby income is reported as other income and follows different tax rules.
- Reporting income incorrectly could lead to IRS notices or adjustments later.
When in doubt, review your situation carefully and keep records showing how the income was earned.
Key Takeaway
A Form 1099-K reports payments processed through cards, payment apps, and online marketplaces. If the payments came from a hobby, report them as hobby income. If the form was issued in error, report the amount and then enter an offsetting adjustment to remove any non-taxable income. Taking the time to classify the income correctly can help you avoid paying more tax than necessary.