IRS Form 1099-K Mistakes: How to Fix Discrepancies on Your Tax Return?

Are you surprised that your tax bill jumped because of a 1099-K? It’s happening a lot with the new rules. If you sell online or freelance and get paid digitally, you might see one of these forms and errors happen. Knowing how to fix them makes tax time way less stressful and can save you from headaches and money problems.

What Exactly Is Form 1099-K and Why Are You Getting One?

The 1099-K form is basically the IRS’s way of tracking money you get through credit/debit card transactions or platforms like PayPal, Venmo, Etsy and eBay. It’s how they make sure everyone’s reporting their income correctly.

There’s been a tweak on 1099-K reporting for 2024 taxes. You’ll get the form if you made $5,000 or more through payment apps or online marketplaces, no matter how many transactions. This is a temporary setup before it drops to $600 in 2025 (plans could change though). Basically, that $5,000 mark for 2024 is kind of a bridge between the old rule and the future one.

The 1099-K form is for reporting money you get paid for stuff you sell or services you provide. It doesn’t cover things like getting your friend to pay you back for their half of the pizza on Venmo. However, if you’re selling your awesome handmade stuff online, that income definitely goes on a 1099-K.

How 1099-K Differs From Other 1099 Forms?

In order to clear up any confusion about all those 1099 forms, we should first break down the differences between them before we look at any issues you might have.

• Form 1099-K
  This details the payments that have been processed via payment cards and third-party networks.
• Form 1099-NEC
  This covers payments of $600 or more to independent contractors and other non-employees.
• Form 1099-MISC
  This form covers various income sources such as rent, royalties, awards and specific medical payouts.

If you get different income forms for the same thing like a 1099-NEC and a 1099-K for freelancing, you just need to include that income one time on your taxes.

Common 1099-K Mistakes That Could Impact Your Tax Return

Mistakes on your IRS Form 1099-K can lead to tax problems. Here are some typical errors to keep an eye out for.

1. Incorrect Payment Amounts 

Imagine making $30,000 but getting a form saying you made $300,000. That extra zero can seriously mess with your income and tax bill. Double-check those 1099-K numbers against your own records. This could save you a lot of trouble.

2. Personal Transactions Misclassified as Business Income 

Payment systems sometimes mess up and mix personal and business payments. For instance, if your cousin sends you $500 for car repairs, it might get flagged as business income on Form 1099-K. This means the form could show you made more money than you really did for business and you might end up paying extra taxes to the IRS on money that shouldn’t be taxed.

3. Wrong Taxpayer Information 

It is super important to double-check your name, address and Taxpayer ID (TIN). Getting these wrong can mess things up with the IRS like making it hard for them to connect your return to your info. A typo in your TIN could lead to your income being mixed up and you might get notices from the IRS or have delays with your return getting processed.

4. Duplicate Income Reporting 

You might get both a 1099-NEC and a 1099-K for the same money but don’t worry, you only need to report it once on your taxes. Reporting it twice could lead to you paying too much and might even catch the IRS’s attention.

5. Receiving a 1099-K in Error 

A serious issue requiring immediate attention is receiving a 1099-K for transactions that are not yours which could be possibly due to identity theft or payment processor errors.

How to Spot 1099-K Discrepancies Before They Become Problems?

Fixing possible tax issues early on makes doing your taxes much easier. Spotting problems now means avoiding bigger headaches down the road.

• Keep detailed records of all business transactions throughout the year.
• Regularly reconcile your payment app and marketplace transactions with your bank statements and income ledgers.
• Separate personal and business transactions by using different payment accounts whenever possible.
• When you get your 1099-K forms, take a look at them right away instead of waiting until tax season gets crazy in April.
• Double-check the 1099-K’s gross payment against your own records to spot any possible differences.

Step-by-Step Guide to Fixing 1099-K Errors

If you’ve discovered a discrepancy, don’t panic. Here’s what to do:

Step 1: Review and Document the Error 

First, gather evidence that supports your claim, such as bank statements, platform transaction histories, invoices, and your own bookkeeping records. Compare these with the information reported on your IRS Form 1099-K to pinpoint exactly what’s wrong.

Step 2: Contact the Form Issuer Promptly 

Reach out to the payment processor or platform that issued the incorrect 1099-K. They are responsible for issuing corrections. When contacting them:

• Be specific about the error.
• Provide supporting documentation.
• Request a corrected 1099-K be sent to both you and the IRS.
• Get confirmation in writing about the steps they’re taking and a timeframe.

Most major platforms have specific procedures for handling 1099-K corrections.

Step 3: Follow Up Persistently 

Unfortunately, getting a corrected IRS Form 1099-K isn’t always straightforward. Follow up regularly to ensure action is being taken, and keep records of all communications with the issuer.

Step 4: Consider Your Tax Return Options 

If you’re approaching the filing deadline and still haven’t received a corrected form, you have two main options:

• Just file Form 4868 if you need more time to resolve your issues. It automatically gives you six extra months to file your taxes. However, it’s just an extension to file, not pay.
• File your tax return with an explanation of the discrepancy. Report the full amount from that wrong 1099-K but then on Schedule 1 of your 1040, write in an adjustment and explain what’s up. Make sure to include a note explaining why there’s a difference and what you’ve done to try and get the correct form.

How to Handle Discrepancies on Your Tax Return?

You need to file your taxes but haven’t got the right 1099-K form from the IRS yet? Here’s what to do:

When the 1099-K Reports More Income Than You Actually Received:

• You need to add the total from Form 1099-K onto the right tax form like Schedule C.
• If your 1099-K shows too much income, fix it by taking off the extra on Schedule 1 of your Form 1040. Just write a note saying something like “1099-K Correction – Overreported Income” so it’s clear what you’re doing.
• When returning items, please add a note explaining any differences and what steps you took to address them.
• Make sure to keep copies of all relevant documentation.

When Your 1099-K Includes Personal Transactions:

If your 1099-K includes personal, non-taxable transactions:

• Just make sure to report the entire 1099-K amount on your Schedule C or whatever schedule is applicable.
• Take off the personal expenses on Schedule 1 of Form 1040. Just write “Less Personal Payments Included on 1099-K” so it’s clear what you did.
• You also need to add a description when you submit your filing.

Understanding Tax Return Amendment Status

So, you filed your taxes and then found a mistake on your 1099-K? You’ll probably need to file an amended return using Form 1040-X.

• In order to find out the status of your tax return amendment, you can either check the “Where’s My Amended Return?” tool on the IRS website or call them directly.
• Just so you know, handling changes to tax returns can take quite a while – usually around 16 weeks and sometimes even 20 weeks or more.
• Keep checking in with both the 1099-K issuer and the IRS until this whole thing is sorted out.

Preventing Future 1099-K Problems

Here’s how to dodge 1099-K troubles down the road and make sure your reporting is spot on. A little prep work now saves a lot of hassle later.

• Use separate payment accounts for business and personal transactions.
• Label transactions clearly when using payment apps (e.g., “goods and services” vs. “friends and family”).
• Keep meticulous records throughout the year using a robust bookkeeping system.
• Regularly review your transaction history on payment platforms.
• You might need to chat with a tax expert who knows self-employment or small business taxes inside and out.

When to Seek Professional Help?

Got some weird numbers on your 1099-K? You can probably sort it out yourself. However, if things get confusing, maybe chat with a tax expert.

• We’ve got a pretty big money issue here; there’s a significant discrepancy.
• The issuer’s not fixing a clear mistake.
• Looks like the IRS flagged some income you haven’t reported yet.
• Figuring out the best way to explain the tax return discrepancy can be tricky.

For personalized help, communicating with the issuer &IRS and representation if needed, it’s best to talk to a tax professional.

The Bottom Line

Got an issue with your 1099-K? No worries, it happens. Just make sure to act fast and keep everything documented – super important. Remember, you need to prove your case to the IRS, so having solid records all year round is a lifesaver. Your own records are your best bet to sort things out if something’s off.

So, more people are using payment apps & online marketplaces and the reporting rules are changing. This means a lot more people are going to bump into 1099-K headaches. In order to deal with this, it’s important to know the rules, keep good records and sort out any problems. Staying on top of things will really help with reporting income correctly and avoiding tax dramas.

Have you experienced 1099-K discrepancies? Get in touch with Glocal Accounting and avail our top-notch tax return services to deploy the best strategies and a team of seasoned professionals to solve your issues smoothly.

Bibliography

Internal Revenue Service. 2024. Understanding your Form 1099-K. Washington, DC: Internal Revenue Service. [Accessed 22 May 2025].

Avalara. 2023. How to Prepare Your Business for the 1099-K Changes. Seattle, WA: Avalara, Inc. 4 December. [Accessed 22 May 2025].

Internal Revenue Service. 2017. Amended Return Frequently Asked Questions. Washington, DC: Internal Revenue Service. 6 January. [Accessed 22 May 2025].

Lorenzana, Noel. 2025. 1099K Changes Side Hustlers & Freelancers NEED to Know for 2025* [Video]. 10 April. [Accessed 22 May 2025].