IRS Steps Up Form 1099-K Data Matching for 2025

The Internal Revenue Service says it is expanding automated comparisons between taxpayer filings and third-party information returns such as Form 1099-K. As more payments move through payment apps, online marketplaces, and other third-party payment networks, the agency says matching systems will play a larger role in reviewing income tax filings during the 2025 filing season.

Form 1099-K Reporting Expands With Growth of Digital Payments

Form 1099-K is an information return that reports payments received for goods or services through payment cards and third-party settlement organizations, including payment processors and peer-to-peer payment platforms. These reportable payment transactions may come from online marketplace sales, freelance marketplaces, crowdfunding platforms, ride-hailing platforms, car sharing services, and auction sites.

Payment settlement entities and third-party payment processors file Federal Form 1099-K with both the taxpayer and the Internal Revenue Service. Taxpayers usually receive this tax document by January 31, and the reported totals may later be compared with figures reported on a federal return, such as Form 1040.

The form generally reports the gross payment amount processed through a payment card processor or third-party payment settlement organization. Because it reflects gross receipts rather than final taxable income, totals may include refunds, fees, gift cards, shipping charges, or cash-back incentives, all of which must be reconciled when preparing tax forms.

Online Platforms That May Issue a 1099-K

A wide range of digital services may generate Form 1099-K reporting. Online marketplaces such as Facebook Marketplace, freelance marketplace platforms, ride-hailing platforms, crowdfunding platforms, and auction sites may issue the form when payments are handled through a payment processor or merchant acquirer.

Users of peer-to-peer payment platforms, third-party apps, or peer-to-peer payment systems may receive multiple information returns if transactions pass through multiple third-party processors. Each Federal Form 1099-K reports the processed volume handled by a specific payment card processor or third-party payment settlement organization.

Data Matching Programs Compare Platform Reports With Tax Returns

Internal Revenue Code rules, such as IRC 6050W(e), define the reporting structure for third-party network transactions and payment card activity. These provisions require payment settlement entities and third-party payment processors to report certain reportable payment transactions based on the applicable federal threshold — which differs depending on how payments are processed.

For third-party settlement organizations (TPSOs) — such as payment apps, peer-to-peer platforms, and online marketplaces — Form 1099-K is required only when total gross payments for goods or services exceed $20,000 and the number of transactions exceeds 200 for a payee. This threshold was retroactively reinstated by the One Big Beautiful Bill Act, reversing the lower phase-in amounts that had been introduced under the American Rescue Plan Act.

Payment card transactions follow a different rule: there is no minimum dollar threshold. A merchant acquirer must issue Form 1099-K for payment card activity regardless of the amount processed — even a single dollar of card-based transactions can trigger reporting.

Taxpayers should confirm which type of payment processor issued their Form 1099-K, since the applicable threshold rules differ between TPSOs and payment card processors. (Source: IRS Form 1099-K FAQs)

CP2000 Notices Can Follow Income Discrepancies

If automated matching finds differences between third-party records and a tax return, the agency may send a CP2000 notice proposing adjustments. The notice may involve discrepancies related to gross receipts, non-employee compensation, stock sale income, canceled debt, or other items reported on tax forms.

Taxpayers may need to verify how income appears on Schedule C (Form 1040), Schedule D (Form 1040), Schedule 1 (Form 1040), Schedule E, or Schedule F. Businesses filing Form 1120 or partnerships filing Form 1065 may also review Federal Form 1099-K records to confirm totals reported by third-party payment processors.

Source Links

• https://www.irs.gov/businesses/understanding-your-form-1099-k
• https://www.irs.gov/taxtopics/tc652
• https://www.irs.gov/businesses/gig-economy-tax-center

‍By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now