If you’re self-employed or earn money through freelancing, contract jobs, or gig work, you may receive tax form 1099-K for your 2022 earnings. This tax form helps the IRS determine how much you owe in income and self-employment tax.
While traditional earners receive a W-2 at the end of the year from their employer, nonemployees receive a 1099, which reflects the total amount of money you earned throughout the year. If you made $600 or more from a company, you’ll receive a 1099.
The type of 1099 you receive depends on how you’re paid. If a company pays you directly through cash, check, or ACH, you’ll receive a 1099-NEC form from the company. However, when you’re paid through third-party payment apps like Cash App, Zelle, PayPal, and Venmo, you’ll receive a 1099-K from the payment apps.
A 1099-K is a relatively new tax form that helps prevent self-employed individuals and businesses from hiding earnings that were sent through digital apps, rather than deposited directly into bank accounts. It may also save you from filing multiple 1099s.
For example, if you have five freelance jobs and four of them pay you through PayPal, while the fifth pays cash, you’ll only receive two 1099s: one 1099-K from PayPal and one 1099-NEC from the company who paid you in cash. Previously, you would have received a separate 1099 from each company that paid you $600 or more.
You may receive a 1099-K in the mail or electronically. Expect to start receiving this form in late January or early February. If you use a payment app for personal and business purposes, only business transactions should be reported. If there’s an error on your 1099-K, you should reach out to the payment processing company directly.