Got a 1099-K From PayPal, Venmo, or Etsy? What New Haven Side Hustlers Need to Know Before Filing in 2026

New Haven, CT – February 6, 2026 – If you received a 1099-K form from PayPal, Venmo, Etsy, or another payment platform this tax season, you're not alone. Thousands of side hustlers across New Haven are seeing these forms for the first time and wondering what they mean for their 2026 tax return.

Here's what you need to know before you file.

Understanding the 1099-K Reporting Threshold: The $20,000 AND 200-Transaction Rule!

The IRS requires third-party payment platforms to issue a Form 1099-K when both of the following conditions are met:

• Gross payment volume exceeds $20,000 in a calendar year
• Total number of transactions exceeds 200 in a calendar year
• These thresholds apply separately to each platform

Both conditions must be satisfied. If you received a 1099-K, you crossed both thresholds on that specific platform.

Example scenarios:

• You sold 250 vintage items on Etsy for $50 each = $12,500 total. No 1099-K issued because you're under the dollar threshold, despite exceeding 200 transactions.
• You sold 150 handmade items for $200 each = $30,000 total. No 1099-K issued because you're under the transaction threshold, despite exceeding the dollar amount.
• You sold 220 custom prints for $100 each = $22,000 total. 1099-K issued because both thresholds are met.

This reporting rule applies to platforms including PayPal, Venmo (business profiles), Etsy, eBay, Poshmark, Mercari, Cash App for Business, and similar third-party settlement organizations.

What to Do When Your 1099-K Arrives!

Upon receiving your Form 1099-K, take the following steps immediately:

1. Verify the Accuracy of Reported Amounts

Compare the gross payment amount shown on your 1099-K against your business records. The form reports gross payments but does not account for:

• Returns and refunds issued to customers
• Shipping costs passed through to buyers
• Personal transactions mistakenly included
• Sales tax collected (in applicable states)
• Cost of goods sold

2. Identify and Document Discrepancies

Errors on 1099-K forms are common. Review your platform's transaction history and download annual statements. If you identify discrepancies, contact the payment platform directly to request a corrected 1099-K before filing your return.

3. Reconcile Your Business Records

Create a spreadsheet that shows:

• Total gross receipts from your 1099-K
• Adjustments for returns, refunds, and non-taxable transactions
• Your actual taxable business income
• Allowable business expenses and deductions

This reconciliation document should be retained with your tax records in case of IRS questions or audit.

You Still Owe Taxes Even Without a 1099-K!

Many New Haven side hustlers make this critical mistake: assuming that income is tax-free if no 1099-K was issued.

This is incorrect.

All taxable business income must be reported on your federal tax return, regardless of whether you received a 1099-K form. If your payments fell below the $20,000 threshold or you completed fewer than 200 transactions, the platform was not required to issue a form, but you are still required to report the income.

Document your income using:

• Bank statements showing platform deposits
• Payment platform transaction histories
• Sales receipts and invoices
• Spreadsheets tracking individual transactions

Report this income on Schedule C (Form 1040) if you're a sole proprietor or on the appropriate business tax return for your entity type.

The Payment Card Exception: No Threshold Applies!

Transactions processed through credit or debit cards follow different rules. Payment card transactions have no minimum reporting threshold, meaning they may be reported to the IRS regardless of volume or transaction count.

If you accepted credit card payments directly (not through a third-party app), those payments may appear on a separate 1099-K with different reporting requirements. Review all 1099-K forms received to understand which transactions are being reported.

Connecticut State Requirements: Know the Difference!

Connecticut may have state-specific 1099-K reporting thresholds that differ from federal requirements. As of 2026, verify Connecticut's current threshold with the Connecticut Department of Revenue Services or consult with a tax professional familiar with state tax law.

Key considerations for Connecticut residents:

• State income tax applies to all business income reported on your federal return
• Sales tax obligations may apply if you sold tangible goods to Connecticut customers
• Local business licenses or permits may be required depending on your activity
• Estimated quarterly tax payments may be required if you owe more than $1,000 in state tax

Do not assume that federal and state requirements align. Check both separately.

Common Deductions New Haven Side Hustlers Often Miss!

If you received a 1099-K, you're running a business in the eyes of the IRS. Take advantage of legitimate business deductions to reduce your taxable income:

Home Office Deduction: If you use a dedicated space in your New Haven home exclusively for business, you may qualify for the home office deduction.

Vehicle Expenses: Track mileage for business-related trips, including drives to the post office for shipping, supply runs, or client meetings. The 2026 standard mileage rate applies.

Supplies and Materials: Deduct the cost of materials, packaging supplies, shipping materials, and inventory purchases.

Platform Fees: Deduct transaction fees, listing fees, payment processing fees, and subscription costs for seller accounts.

Marketing and Advertising: Deduct costs for social media ads, website hosting, business cards, and promotional materials.

Professional Services: Deduct fees paid for tax preparation, bookkeeping, legal advice, or business consulting.

Maintain receipts and documentation for all claimed deductions. The IRS may request substantiation during an audit.

When to Seek Professional Tax Help in New Haven!

You should consult a tax professional if:

• Your 1099-K shows significant discrepancies that the platform won't correct
• You received multiple 1099-K forms from different platforms
• You're unsure how to properly report or offset the gross income shown
• You have complex deductions or mixed personal/business use of assets
• You owe self-employment tax for the first time
• You need guidance on quarterly estimated tax payments for 2026

At Jose's Tax Service, we work with New Haven side hustlers every day who receive 1099-K forms from payment platforms. We'll help you accurately report your income, maximize your deductions, and ensure compliance with both federal and Connecticut tax requirements: all at competitive rates with personalized service that addresses your specific situation.

Action Steps Before April 15th!

Complete these tasks before filing your 2026 return:

1. Collect all 1099-K forms from every payment platform you used in 2025.

2. Download complete transaction histories from each platform.

3. Reconcile reported gross receipts with your actual taxable income.

4. Compile receipts and documentation for all business expenses.

5. Calculate your estimated self-employment tax liability (15.3% of net profit).

6. Determine if you need to make estimated tax payments for 2026.

7. Schedule a consultation with a qualified tax preparer if you need assistance.

Missing the April 15th deadline can result in penalties and interest charges. File on time or request an extension using Form 4868, but remember that an extension to file is not an extension to pay any taxes owed.

Get Help From New Haven's Trusted Tax Pros!

Don't navigate 1099-K reporting alone. Jose's Tax Service has been helping New Haven families and small business owners file accurately and maximize their refunds for years. Whether this is your first 1099-K or you're a seasoned side hustler, we'll make sure you're filing correctly and taking advantage of every deduction you deserve.

Call us today to schedule your appointment. We offer competitive rates, flexible hours, and personalized service that puts your unique tax situation first.

Visit Jose's Tax Service or stop by our New Haven office. Let's get your taxes done right.