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Retired Military Finances 201: What is a Form 1099-K? Thumbnail

Retired Military Finances 201: What is a Form 1099-K?

Taxes

If you've retired from the military (or are still on Active Duty) and have a side-hustle or business, you have some tax reporting requirements. To help you meet your requirements, the IRS often requires the people who pay you to report that information (to the IRS) and provide a form to you. This has been going on for years and many of us who are self-employed have received a 1099-Misc or 1099-NEC. Add to that list the Form 1099-K. Payment facilitators like Visa, MasterCard or PayPal are required to file the form if the amount paid to an individual exceeds a certain amount. That amount seems to be a moving target and many of these firms are providing the 1099-K even if you receive less than the threshold.

How Does Receiving a Form 1099-K Change My Tax Reporting?

Unless this is the first year of your side-hustle, your tax reporting requirements haven't changed at all. You are required to report income from all sources unless it is specifically excluded or exempted. Side hustles don't get excluded (or exempted). So, you'll report the income, most likely on Schedule C, whether you get a Form 1099-K or not.

Just be careful when you report the income that your tax software handles it correctly. Some software may transfer data from a 1099-K input screen, or it might not. If you're not careful, you could end up double reporting the income or not reporting it at all.

Why Does My 1099-K Show More Income than I Actually Received?

The IRS requires those payment entities to report your total amount of income. This is before charges levied by the service. What you need to do (again on the Schedule C) is report all the income and then take out the charges that the company charged you as an expense. You'll end up with the net amount they actually paid you. And don't forget to include your other expenses too.

Military Finances are Different

Granted, military retirees aren't the only ones out there with a side-hustle. But in many significant ways, military members, active and retired, have unique financial benefits and sometimes challenges. That's why we think Active and Retired Senior Military Officers and NCOs should work with a financial planner/advisor that deals with people like you each and every day. If you'd like to find out how we work with clients just like you, use the button below to schedule a free, initial consultation.

If you found this article useful, you might like the following blog posts:

Military Finances 201: Contributing to Roth AND Traditional IRAs


Military Finances 101: Getting Charitable Ducks in a Row


Retiring from the Military? Say Hello to the NIIT and Medicare Surtax


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