What Small Business Owners and Online Sellers in Western New York Need to Know
If you own a small business in Jamestown, Lakewood, Mayville, or anywhere in Western New York, and sell products or services online, you’ve probably heard about Form 1099-K. Whether you operate an Etsy shop, sell on eBay, accept payments through Square, or receive business income through PayPal or Venmo, understanding this tax form can help you avoid surprises when it’s time to file your tax return.
What Is Form 1099-K?
Form 1099-K, Payment Card and Third Party Network Transactions, is an information return that reports payments you receive through credit cards, debit cards, and third-party payment platforms for the sale of goods or services.
Payment processors send a copy of the form to both you and the IRS. The IRS uses this information to compare the payments reported by payment processors with the income reported on your tax return.
Who May Receive a Form 1099-K?
For federal reporting purposes, third-party settlement organizations (TPSOs)—including platforms such as Etsy, eBay, PayPal, Venmo (for business transactions), and Square—are generally required to issue this form when both of the following apply:
- You receive more than $20,000 in gross payments for goods or services, and
- You have more than 200 transactions during the calendar year.
However, there are important exceptions to remember.
Some payment processors may choose to issue a Form 1099-K even if you don’t meet the federal reporting threshold. In addition, some states have different reporting requirements than the federal government, meaning you could receive a Form 1099-K based on your state’s rules.
Receiving a Form Doesn’t Mean the Entire Amount Is Taxable
One of the most common misconceptions is that you’ll owe taxes on the full amount shown on the form.
That’s not how it works.
The form reports your gross payment amount before expenses are deducted. It generally does not subtract:
- Marketplace fees
- Credit card and payment processing fees
- Shipping costs
- Sales tax collected
- Customer refunds or returns
- Other ordinary business expenses
Your taxable income is calculated after deducting eligible business expenses—not simply from the total listed on Form 1099-K.
No Form? You Still Must Report Your Income
Some business owners mistakenly believe that if they don’t receive a Form 1099-K, they don’t have to report the income.
That’s incorrect.
Whether you sell handmade products at local craft fairs in Chautauqua County, operate an online boutique, freelance from home, or run an e-commerce business, you’re generally required to report all taxable business income—even if no tax form arrives in the mail.
Personal Payments Usually Aren’t Included
Money received from friends or family for personal reasons generally isn’t taxable and shouldn’t appear on Form 1099-K.
Examples include:
- Paying a friend back for dinner
- Birthday or holiday gifts
- Splitting household expenses
- Reimbursements from family members or roommates
Whenever possible, mark personal transactions as non-business payments within payment apps to help reduce reporting errors.
Good Recordkeeping Makes Tax Time Easier
Whether you’re running a side business from your home in Lakewood, selling artwork online from Jamestown, or operating a growing business in Mayville, organized bookkeeping can save you time and money.
Keep records of:
- Gross sales
- Marketplace and payment processing fees
- Shipping income and expenses
- Refunds and returns
- Inventory purchases
- Office and business supplies
- Vehicle mileage
- Other deductible business expenses
Good records make preparing your tax return much easier and help explain any differences between your accounting records and the amounts reported on Form 1099-K.
We Help Western New York Small Businesses
At Gleason Tax Advisory, we work with small business owners throughout Jamestown, Lakewood, Mayville, Chautauqua County, and surrounding Western New York communities. Whether you sell online, operate a local storefront, freelance, or have a growing side business, we can help you understand your reporting requirements, maximize available deductions, and prepare an accurate tax return.
If you’ve received a Form 1099-K—or simply have questions about reporting business income—Bruce is here to help.
If you’ve received a Form 1099-K
—or simply have questions about reporting business income—
Bruce is here to help.