If you’ve used Stripe, Venmo, PayPal, Square, Iron Podium, or any other third party payment processor this year, there’s a good chance you’ll be receiving a 1099-K at tax time.
But what the heck is a 1099-K, what do you do with it, and how does it affect promoters (both big and small) in the United States?
I talked to a couple super smart tax professionals and read more information about tax regulations than I would’ve liked. And I’ve summarized all that info so that regular promoters like you and me can make sense of it come tax time.
Now, take a deep breath with me, and let’s dive into it.
What is a 1099-K?
A 1099 is a tax form used to report non-employee income (i.e. not a W-2). This includes income from things like: driving for a rideshare service, selling items online, running a side hustle dog walking business, or promoting a strongman competition.
There are different kinds of 1099s depending on the source of income. In this article, we’ll be talking specifically about a fun new kind of 1099 called the 1099-K.
The most clear explanation I found was from Tax Bandits: “The 1099-K primarily covers digital payments, including transactions facilitated through credit cards, debit cards, stored value cards, and payment platforms like PayPal or Stripe.”
This includes payments through and from Iron Podium.
Who Receives a 1099-K?
You will receive a 1099-K if your transactions met the current legal threshold for the year (see below). For many years, this threshold has been set at $600, but did not apply to third party processors (for whom the threshold was set at $20,000). So smaller merchants – like strongman promoters – could easily fly under the radar.
In 2023, the law changed, dropping the threshold for third party processors from $20,000 to $600 to match other payment/income methods. If you promote competitions using Iron Podium, you received an email from them in mid-2023 announcing this change. This prompted some questions about whether it made sense to stop using Iron Podium. The simple answer here is: no. No matter what processor you use – including all the usual suspects like Eventbrite, Stripe, and Venmo – you will receive a 1099-K if your transactions over the course of the year reach the legal threshold.
UPDATED 02/01/2024: Congress voted to POSTPONE a planned change in threshold and opt for a phased-in approach. For 2023, the threshold remains at $20,000 and 20 transactions. In 2024, the threshold will be $5,000 and then decrease to $600 in 2025. This means that if you received less than $20,000 from a third party processor in 2023, you will probably not receive (or need) a 1099-K from your online payment processor(s) of choice.
It’s important to note that the adjusted threshold does not affect the actual tax law to report income on your tax return. All income, no matter the amount, is taxable unless it’s excluded by law whether a Form 1099-K is sent or not. You also may still receive a 1099-K from your payment processor(s) regardless of the amount you processed in 2023.
What Do You Do With a 1099-K?
Obviously, you should just throw it in a stack with the other mail and pretend it doesn’t exist. Done and done. Moving on.
Ok, for real though. You’re going to need to include that 1099-K with your taxes when you file. You’ll report the income that’s on the 1099-K as “additional income” using a Schedule C form.
On the 1099-K, box 1a is a field called “Gross amount of payment card/third party network transactions.” In most cases, this is the “gross income” number you’ll use on the Schedule C.
The Schedule C is also the place to record any expenses you racked up related to that income. Definitely do this! You will pay more in taxes than needed if you don’t!
The self-employment tax is calculated based on the net income from the Schedule C (i.e. the money you received minus the money you spent). So… track every expense related to the money you bring in from a competition!
This includes things like: equipment made for the competition, shirts, trophies, venue rental, mileage, insurance, banners and promotional materials, and advertising.
Make a spreadsheet. Save your receipts. Track your mileage. This is a good practice regardless of taxes. But it’s especially important now with the issuance of these 1099-K forms.
What If You Don’t Own a Business?
If you’re a business – like a gym or online coach – reporting the income and tracking expenses isn’t a big deal because you’re already doing that for your business.
But what if – like many promoters – you’re just a regular person with a regular W-2 employee job and you promote strongman shows here and there for funsies? Do you need to set up a bunch of business stuff to report this income?
Nope.
You don’t need to own a business or have an LLC or anything of the sort to report additional income using the 1099-K and a Schedule C form. You can report the income as an individual using your Social Security Number.
The only bummer here is that if you use something like TurboTax to file your taxes and you are typically a regular old 1040 person (meaning you basically just have a W-2 and other “normal” tax stuff), including the 1099-K will require an additional form (the Schedule C), which could cost you some extra money from a tax prep person or software.
TL;DR
The 1099-K is here, and there is nothing you can do to stop it from arriving. No matter what software or service you use to accept money from people, if you accept an amount at or exceeding the legal threshold you will receive this form.
You do not need to own or form a business to report your 1099-K income or claim expenses against it. If you do have a business, this is just another day in the office of reporting your income and expenses. If you don’t own a business… here’s a small taste of what it’s like to have one. Just report the income using your SSN and a Schedule C form.
Track your [bleeping] expenses! Remember that the taxable part of the income is the net income. So keep track of what you spend related to the competition so you can write it off when you file.
Keep promoting! I know this isn’t ideal, and it’s really tough out there for small business owners. As a promoter – especially if you have a primary job that isn’t promoting – it might be weird to think of yourself as a business owner. But the reality is that you are! You run a tiny little strongman business all your very own. And that’s awesome! The sport needs you. This whole 1099-K thing is just one additional step in promoting a show, and you can totally do it.
Need Help?
Running your own little tiny (or very big!) strongman business can be overwhelming. We get it. Take some time to browse the other free resources on Strongman.Training, and please feel free to reach out to us if you need additional help.
We’re available for free 15-min coaching calls, full 60-minute coaching and mentoring sessions, and quick questions via email (strongmandottraining@gmail.com). Also, one of the tax pros I consulted for this article (Shaun B.) is offering a discount on tax return prep to any referrals from Strongman.Training. If you want to get connected with Shaun (who is objectively brilliant and amazing), just reach out to us and we’ll give you the details and make the referral.
The only way this thing works is if we help each other out and build it together. Thanks for all that you do.
Acknowledgements and Fine Print
Thank you so much to Kim and Shaun (you know who you are) for your help in putting this article together. Your smarts, kindness, and generosity with your time made it easy (even fun perhaps?) for this tax-anxiety-prone promoter to write with confidence about a confusing topic.
Resources:
- IRS.gov, “Understanding Your Form 1099-K” – https://www.irs.gov/businesses/understanding-your-form-1099-k
- Tax Bandits, “Overview of Form 1099-K, 1099-NEC and 1099-MISC” – https://www.taxbandits.com/1099-forms/1099-k-vs-nec-vs-misc
- TurboTax, “1099-MISC, 1099-NEC, or 1099-K: What’s the Difference?” – https://blog.turbotax.intuit.com/self-employed/1099-misc-or-1099-k-whats-the-difference-29903/
Disclaimer: I did consult licensed tax professionals for this article, but I am not a tax professional. Nothing in the above article should be taken as professional tax or financial advice. Please consult a tax professional before making any tax-related decisions for yourself or your business.
