Understanding why you have received a Form 1099-K is just as essential as making sure that you know the rule changes for 2025 and how these changes affect small businesses. When a 1099-K form is sent to your business, you will receive it from:
- Third-party payment processors
- Payment apps (i.e.: PayPal, Venmo, Cash App)
- Credit card companies
- Online marketplaces (i.e.: eBay, Etsy, Poshmark)
The form is a way for the Internal Revenue Service to receive a report of the payments that you received for specific goods or services throughout the year. The organizations that are required to fill out the form must send copies to your business and the IRS. Keeping careful track of your Form 1099-K with other tax records allows you to determine your taxable income when it comes time to file your business’s annual tax return.
Advanced Micro Solutions’ base W-2/1099 Forms Filer program is a complete database system that allows its users to generate different 1099s, W-2s, and related forms. The easy-to-use and menu-driven format simplifies how you select payers and forms. Our software is additionally the cheapest solution on the market for small businesses as they navigate tax year 2025.
What are the 1099-K Rule Changes for 2025?
The number of small businesses and independent contractors who received IRS Form 1099-K drastically increased for tax year 2025 for a key reason. Whether you received a tax form from one of the payment apps or from a third-party payment processor, the threshold had changed.
Old Rule
- Threshold was over $20,000 and more than 200 transactions
- Many sellers never exceeded the threshold
New Rule (2025)
- Threshold is over $600
- The number of transactions does not matter
It is important that your business does not fall victim to the misconceptions that are sometimes associated with IRS Form 1099-K. Some of the most common misconceptions include thinking that 1099-K forms will not affect you if:
- You do not use a business bank account
- You already used Schedule C to report any income
- You are not a big seller
Always keep in mind that personal accounts used for your business’s income count when it is time to receive 1099-K forms. Similarly, you will still receive a 1099-K form and must reconcile the income regardless of whether you reported it on Schedule C. The 2025 implementation of the $600 threshold means that many small businesses and hobbyists now qualify to receive a Form 1099-K from a third party.
How Does Form 1099-K Affect Small Business Bookkeeping?
Reconciling payments and record-keeping are important no matter the 1099 forms that you receive from a third party. That means a business needs to know what 1099-K forms cover, along with what they do not report. Form 1099-K reports gross payment activity. A 1099-K document does not take into account:
- Refunds
- Fees
- Chargebacks
- Expenses
Always compare your 1099-K totals to the actual bank deposits. Make sure that you adjust the books for any business expenses and/or refunds. Keeping better documentation of merchant fees, refunds, and/or cash vs. card payments will help your business reduce its risk of audits.
Is AMS Software Right For Us?
Small businesses need intuitive software that they can trust so that there is a minimal or virtually non-existent learning curve. Making common mistakes like double-counting income or missing a form is much less likely to occur with a trustworthy program. Users can build out our W-2/1099 Forms Filer with six optional add-on modules. These include:
- AMS Payroll
- Software Generated Forms
- Forms Filer Plus
- E-File
- 1042-S Filer
- Affordable Care Act Filer
Download our free 1099-etc Demo software today and see which of our programs makes the most sense for your current or future needs. Enter your actual data into the demo to see how our software handles it. Once you decide to purchase the software, all of your data will carry over with it. Popular features of our W-2/1099 software include:
- A Common Payee File to select a payee across payers/1099 forms without re-entering the same information multiple times
- Selected fields can be calculated
- Data can be imported from multiple sources (i.e.: Excel, form print files, and ordinary text files)
- The Browse command allows users to enter data with a spreadsheet format
- Data is automatically saved whenever a new record or form is accessed
Are you still unsure about which of our programs fits your needs the most? Consider visiting our Frequently Asked Questions page or reviewing our video tutorials.