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Side income
Venmo, PayPal, Etsy, eBay: the 1099-K
The form tells the IRS what came in through the app. It doesn’t tell anyone what was taxable. That part is up to you, and the same $12,000 through the same app can mean nothing, a capital gain, or a Schedule C depending on what it was for.
Payment apps and online marketplaces report what they pay out, and the IRS gets a copy. For 2026 the threshold is back where it was for years: more than $20,000 and more than 200 transactions. But the threshold only decides whether a form shows up. Whether the money is taxable depends on what it was for, which the app cannot know, and a woodworker who sold $8,000 of furniture through Etsy in 40 sales will not get a 1099-K and still owes tax on the profit.
| The payment | Taxable? | Where it goes |
|---|---|---|
| Friends splitting dinner, a roommate’s rent, a loan paid back | No | Nowhere; backed out if it landed on a form |
| Selling your own used couch or clothes for less than you paid | No; the loss is not deductible | Shown and zeroed out on Schedule 1 (verify the 2026 lines) |
| Selling a personal item for more than you paid: a watch, tickets above face value, a collectible | Yes, capital gain | Form 8949 and Schedule D |
| Buying to resell, selling what you make, getting paid for work or rides | Yes, with expenses deducted | Schedule C, with self-employment tax |
| Occasional sales of a hobby | Yes, on the gross; expenses not deductible | Schedule 1, other income |
What the form is
Form 1099-K comes from the company that moved the money: Venmo, PayPal, Cash App, Square, and marketplaces such as Etsy, eBay, Amazon, Poshmark, StubHub, Uber and DoorDash. The number on it is gross: every dollar that came through for goods and services, before the platform’s fees, refunds you gave, shipping, and the cost of whatever you sold. Nothing on a 1099-K is profit. It is a count of money in.
The IRS computer matches the form against your return. If $23,000 of gross payments is reported under your Social Security number and your return shows nothing, a notice follows a year or more later proposing tax on the whole $23,000.
The threshold
Both parts of the test must be met; $30,000 across 150 transactions does not require a form, though some platforms send one anyway, and some states set lower thresholds for their own purposes (Colorado does not). The threshold has nothing to do with what is taxable. The form is a reporting rule for the platform, not a tax exemption for the seller, and the IRS still receives a 1099-NEC from a business that paid you $2,000 or more for work regardless of how the money moved.
Worked example: one PayPal account, $26,400 on the 1099-K
| What the money was | Gross on the form | Treatment | Taxable |
|---|---|---|---|
| Roommate’s share of rent, $900 a month | $10,800 | Personal; backed out with a description | $0 |
| Old furniture and clothes sold on Marketplace (cost about $6,000) | $2,100 | Personal items at a loss; shown and zeroed | $0 |
| Two concert tickets bought at $180 each, sold for $620 each | $1,240 | Personal item at a gain: $880 short-term gain on Form 8949 | $880 |
| Reselling sneakers bought to flip: 60 pairs | $12,260 | Schedule C: less $8,900 of inventory, $1,100 of fees and shipping | $2,260 profit, plus self-employment tax |
| Total | $26,400 | $3,140 of income, about $690 federal at 22%, $320 of self-employment tax, $140 Colorado |
A return that reported nothing would draw a notice proposing tax on $26,400, roughly $7,000. A return that reported $26,400 as business income would overpay by about $6,000. The right answer sits between, and it comes from records: the lease, the ticket receipts, the sneaker invoices. Going forward, the roommate should pay as “friends and family,” which most platforms leave off the form.
When the form is wrong
The usual cause is one account used for both personal payments and selling. The platform reports the total. The fix is on the return: the full amount is shown so the IRS computer finds its match, and the personal portion is backed out with a short description. Leaving the personal part off is what generates the notice. A form that double-counts, or carries your Social Security number for someone else’s account, should be corrected by the issuer; if it will not, the return is filed with the correct figure and an explanation. A big gross with a small profit is not an error: a reseller with $25,000 of sales may have $18,000 of inventory cost, fees and shipping. Records turn the gross into the profit; without them, the gross is what gets taxed.
Behind the scenes
Before touching the total on a 1099-K, a preparer reads the month-by-month breakdown on the form. Twelve roughly equal monthly amounts are usually a roommate’s rent or a family member paying back a loan. Uneven amounts peaking in November and December are usually a seller. The form does not say which; the pattern does, and it tells the preparer what to ask before anything goes on Schedule C. The second read is the platform: a 1099-K from Uber or DoorDash is a business by definition, and the question becomes mileage.
The Colorado side
Colorado has nothing separate: whatever is profit federally flows into Colorado income at 4.40%, and personal payments backed out federally never reach the state return. A Schedule C seller with real volume may also need a Colorado sales tax license for sales to Colorado buyers, which is a different tax entirely; marketplaces such as Etsy and eBay collect it on the seller’s behalf, while a seller taking payments directly through Venmo or Square does not have that cover (verify). A delivery or rideshare driver’s Colorado income is the same net profit as federal, less any Colorado-specific adjustments.
What to bring your preparer
- Every Form 1099-K, with the monthly breakdown on the back or in the app
- A list of what the money was for, month by month, especially personal transfers
- For personal items sold: roughly what you paid for them (a loss owes nothing but has to be shown)
- For resale or a side business: inventory costs, fees, shipping, mileage, and any 1099-NEC received
- For tickets or collectibles sold at a gain: purchase and sale records
- For rideshare or delivery: the platform’s annual summary and a mileage log
Questions people ask
I got a 1099-K for $22,000 but it was mostly my roommate’s rent. Do I owe tax on it?
No, on the rent portion, but the form has to be dealt with on the return: show the full amount and back out the personal part with a description. Ignoring it is what brings the notice.
I sold $4,000 of old stuff on eBay at a loss and got no form. Anything to report?
Nothing is owed on personal items sold at a loss, and with no form nothing is matched. Keep a note of what the items cost in case a form ever shows up.
I didn’t get a 1099-K from Etsy. Does that mean my sales aren’t taxable?
No. The threshold decides whether a form is sent, not whether income is taxable. Business income is reportable from the first dollar, with your expenses deducted.
The 1099-K has my Social Security number but it’s my teenager’s account. What now?
Ask the platform to correct it to the actual account holder’s number. If it will not, file with the correct figure (zero for you) and an explanation; your teenager reports the sales.
Is Venmo going to report my $600 of birthday money?
No. The $600 threshold never took effect and was repealed; the 2026 threshold is $20,000 and 200 transactions, and gifts and reimbursements were never taxable anyway.
Mark personal payments as personal in the app, and keep what things cost
Most platforms leave friends-and-family payments off the form. For anything you sell, a note of what you paid for it is what turns a 1099-K’s gross into a loss that owes nothing or a profit that owes a little.