When PayPal sends a 1099-K
PayPal issues a 1099-K to report goods and services payments once you cross both the $20,000 sales and 200 transactions threshold in a calendar year. Goods and service payments may include:
- Client payments
- Commercial payments
- Payments for personal items sold
- Payments for online services
Personal payments between friends and family, like splitting a dinner bill or paying back a roommate, don’t count toward the threshold and shouldn’t generate a 1099-K, as long as they’re tagged as personal rather than goods and services.
Changes to the 1099-K threshold
This threshold has changed several times in recent years:
| Period | Threshold | What happened |
|---|---|---|
| Before 2022 | $20,000 and 200 transactions | Original, long-standing threshold |
| 2021 law (ARPA) | $600, no transaction minimum | Planned drop that was repeatedly delayed and phased in gradually instead |
| 2024 (phase-in) | $5,000 | Temporary phased threshold while the $600 rule was delayed |
| 2025 and beyond (OBBBA) | $20,000 and 200 transactions | One Big Beautiful Bill Act permanently reinstated the original threshold |
Owing taxes on PayPal income without a 1099-K
The reporting threshold only affects whether PayPal sends you paperwork. It has no bearing on whether the income itself is taxable. Every dollar of business or self-employment income you receive through PayPal is reportable on your tax return, whether or not you cross $20,000, and whether or not a 1099-K ever shows up in your inbox.
1099-K vs. 1099-NEC: key differences
A 1099-K reports payments processed through a third-party network like PayPal. A 1099-NEC reports payments a single client made directly to you, once that client pays you $2,000 for tax year 2026 (increased from $600 or more for tax year 2025).
For example, a freelance designer paid $2,500 by one client through PayPal Business gets a 1099-NEC from that client, since the payment topped the $2,000 threshold. PayPal separately issues a 1099-K if the designer’s total processed payments crossed $20,000 and 200 transactions for the year, a total that includes the same $2,500.
Note: Cross-check both forms against your own records so you don’t report that payment twice.
What to do if your PayPal 1099-K is wrong
Incorrect 1099-Ks aren’t uncommon. A personal payment mistakenly tagged as goods and services is one of the most frequent causes. If yours looks wrong:
- Log into PayPal’s Statements & Tax Center to review the transaction details.
- Request a corrected form if you find a payment that shouldn’t have been included.
- Keep documentation of the request in case the IRS ever questions the original figure.
Reporting PayPal income on your tax return
Business income reported on a 1099-K generally goes on Schedule C (the form used to report self-employment income and expenses) along with your other self-employment income. Since the form reports your gross payment amount in Box 1a, you’ll need your own records to back up:
- PayPal’s processing fees
- Refunds
- Any other adjustments that reduce what you actually kept
If you sold a personal item, like furniture or an old phone, for less than you paid for it, it’s generally not taxable, even if it shows up on a 1099-K. Selling personal items at a gain, however, can create taxable income, so keep records of what you originally paid in case the resale price came out ahead.
