Jose's Tax Service LLC.

Your Quick-Start Guide to 1099-K Forms: What New Haven Side Hustlers Must Do First to Maximize Tax Refund

February 25, 2026 • Giveaways

Categories: news, tax planning

NEW HAVEN, CT , JOSE'S TAX SERVICE , FEBRUARY 25, 2026

If you spent 2025 turning your hobby into a hustle, whether that was selling vintage clothes on Etsy, driving for a rideshare app around Yale University, or taking Venmo payments for your freelance graphic design work, the Internal Revenue Service (IRS) is looking for its cut.

Welcome to the second installment of our 2026 Tax Season Series. Last week, we covered the end of the IRS Direct File program. Today, we are diving deep into the most confusing piece of paper in your mailbox: Form 1099-K.

For many New Haven residents, the 1099-K is the difference between a healthy refund and a surprise tax bill. At Jose's Tax Service, we’ve seen a massive influx of questions regarding these forms. If you want to keep more of your hard-earned money and stay out of the IRS spotlight, you need to act now.

Understanding the 1099-K: Why Did You Receive It?

A Form 1099-K, Payment Card and Third Party Network Transactions, is an information return used to report certain payment transactions. Third-party settlement organizations (TPSOs) like PayPal, Venmo, CashApp, Square, and Etsy are required by law to send these to both you and the IRS.

For the 2025 tax year (the returns we are filing right now in early 2026), the reporting thresholds remained higher than initially anticipated due to phased implementations by the IRS. You should have received a 1099-K if you met both of the following criteria in 2025:

  1. Gross payments exceeded $20,000.
  2. You had more than 200 transactions.

However, don't let those high numbers fool you. Even if you didn't hit the $20,000 mark, you are still legally required to report every dollar of self-employment income on your tax return. Furthermore, if you accepted credit or debit card payments directly through a processor, those have no minimum threshold and are always reported.

Digital payments from a smartphone transforming into a tax form representing 1099-K reporting for side hustles.

Step 1: Verification, The "First Look" Protocol

The absolute first thing you must do when you receive a 1099-K is verify the data. The IRS receives a copy of this exact form. If the numbers on your tax return don't match the numbers on the 1099-K, it triggers an automated red flag in the IRS system, which can lead to delays in your refund or an audit notice.

Follow these imperative steps immediately:

  • Check the Taxpayer Identification Number (TIN): Ensure your Social Security Number (SSN) or Employer Identification Number (EIN) is correct.
  • Verify Gross Amounts: The 1099-K reports the gross amount of transactions. This means the total before fees, refunds, or shipping costs were deducted. Do not panic if the number looks higher than what ended up in your bank account; we will handle those deductions later.
  • Identify Personal Transactions: If you used Venmo to split a dinner bill at a restaurant in Downtown New Haven or received a birthday gift from your aunt, and those were accidentally flagged as "business" payments, you must address this.

Warning: Reporting personal gifts as business income will result in you paying unnecessary taxes. Conversely, failing to report business income because you didn't get a form can lead to penalties and interest.

Step 2: Organize Your "Paper Trail"

To maximize your refund, you need to prove that the "Gross Amount" on that 1099-K isn't all profit. As a side hustler, you are taxed on your net income (Profit minus Expenses).

At Jose's Tax Service, we recommend New Haven entrepreneurs categorize their expenses into the following "IRS-Friendly" buckets:

  1. Platform Fees: The percentage PayPal or Etsy takes off the top.
  2. Shipping and Packaging: Every box, bit of tape, and trip to the New Haven Post Office.
  3. Supplies and Materials: The raw goods you bought to create your products.
  4. Home Office Deduction: If you use a portion of your home exclusively for business, you can deduct a percentage of your rent, utilities, and insurance.
  5. Marketing: Fees for Facebook ads, business cards, or your website.

Freelancer workspace with receipts and calculator illustrating tax deduction planning for New Haven businesses.

Step 3: Reconcile with Schedule C

For most side hustlers in New Haven, your 1099-K income will be reported on Form 1040, Schedule C (Profit or Loss from Business).

If you received a 1099-K for personal items sold at a loss (like selling an old couch for less than you paid for it), you must still account for it to show the IRS why it isn't taxable income. This is a complex procedure that involves offsetting the entry on Schedule 1 (Form 1040).

Instructional Tip: Do not simply ignore a 1099-K for personal sales. The IRS computer system expects to see that 1099-K amount somewhere on your return. If it’s missing, they will send an inquiry letter, which stops your refund in its tracks.

Critical Deadlines You Need to Know

The IRS established clear deadlines for these forms. If you haven't taken action yet, the clock is ticking:

  • February 2, 2026: This was the deadline for TPSOs (PayPal, Etsy, etc.) to mail or provide "Copy B" of the 1099-K to you. If you haven't received yours but believe you hit the threshold, log into your account settings on those platforms immediately to download the electronic version.
  • April 15, 2026: The final deadline to file your 2025 tax return or request an extension.

Why New Haven Side Hustlers Choose Jose's Tax Service

Navigating the 1099-K maze alone is risky. One small clerical error can cost you thousands in overpaid taxes or future penalties.

At Jose's Tax Service, we provide the personalized, expert care that "big box" tax software simply cannot offer. We know the New Haven community. We understand the specific challenges faced by local small business owners and freelancers.

  • Expert Review: We don't just "plug in" your 1099-K. We analyze your bank statements and receipts to ensure every legal deduction is claimed.
  • Competitive Rates: We offer professional tax preparation at rates designed for the working person. You shouldn't have to spend your entire side-hustle profit just to get your taxes done.
  • Audit Protection: We stand by our work. If the IRS has questions about your 1099-K reporting, we are here to handle the communication.

New Haven tax professional at Jose's Tax Service helping a client with 1099-K forms and tax refund strategy.

Actionable Checklist for This Week:

  1. Download all 1099-K forms from your digital payment portals.
  2. Print out a summary of fees paid to those platforms (these are often listed separately from the 1099-K gross total).
  3. Separate "Personal" from "Business" transactions if you used one account for both.
  4. Gather mileage logs if your side hustle involves driving (e.g., DoorDash, Uber, or traveling to clients).
  5. Book an appointment with Jose Morales. Visit https://josestaxservice.com to secure your spot before the April rush.

What’s Coming Next?

Don't let the 1099-K stress you out. With the right documentation and professional guidance, this form is simply a tool to help accurately report your success.

Stay tuned for our next post in this series: "Why Your 2026 Refund Could Be Bigger (or Smaller) Than Expected: The Standard Deduction Changes Explained in 3 Minutes." We’ll be breaking down how the latest inflation adjustments impact your bottom line.

Ready to get your maximum refund?

Stop by our office or visit our Small Business Learning Center for more resources. Let’s make 2026 the year your side hustle stays profitable and protected.

Jose Morales
CEO, Tax Pro, & Owner
Jose's Tax Service , New Haven's Trusted Tax Partner

Disclaimer: This blog post provides general information and should not be construed as specific legal or tax advice. For personalized guidance, please consult with a qualified tax professional.

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