What the 1099-K actually is
Form 1099-K, "Payment Card and Third Party Network Transactions," is filed by Third Party Settlement Organizations (TPSOs) and payment card processors. A TPSO is any platform that sits between a buyer and a seller and settles the money - Etsy Payments, eBay's managed payments, Amazon Pay/Seller Central, PayPal, Stripe, Square, and Shopify Payments (which runs on Stripe). When you cross the reporting threshold, the platform files a copy with the IRS and sends a copy to you, keyed to your LLC's legal name and EIN.
The critical word is informational. The 1099-K reports gross payment volume - the total amount buyers paid, before the platform deducted its fees, before refunds, before shipping costs, before any business expense. It is not a statement of income, and it is emphatically not an invoice from the IRS. The IRS receives the same copy and uses it to cross-check whether the income shows up somewhere on a return. That is the entire function: a matching document.
For non-resident LLC owners this distinction matters enormously, because the number on the 1099-K will almost always look alarming. An Amazon FBA seller doing $120,000 in gross sales might keep $15,000 after cost of goods, FBA fees, advertising, and refunds. The 1099-K shows $120,000. Your actual reportable position is the net figure that flows through your pro forma 1120.
The 2026 threshold: $20,000 and 200 transactions (it changed back)
This is where most online guidance - including older versions of our own - is now wrong, so read carefully.
The American Rescue Plan Act of 2021 lowered the federal 1099-K threshold to $600 with no transaction minimum, scheduled to phase in through 2025 and 2026 (via interim steps of $5,000 and $2,500). Then, on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) repealed that change entirely and restored the original $20,000-and-200-transaction threshold, retroactively to tax year 2025. The IRS confirmed this in Fact Sheet 2025-08 (October 23, 2025) and updated its 1099-K FAQs accordingly.
So for tax year 2026, a platform is federally required to issue a 1099-K only if both of these are true:
| Condition | Federal 2026 requirement |
|---|---|
| Gross payments for goods/services | More than $20,000 |
| Number of transactions | More than 200 |
| Logic | Both must be exceeded |
Two consequences follow. First, a seller doing $50,000 across only 80 high-ticket transactions does not meet the federal test (transaction count too low). Second, many platforms still issue a 1099-K at far lower volumes anyway - partly out of caution, partly because their systems were already rebuilt for the $600 rule. Receiving a 1099-K below the threshold does not mean you did something wrong, and not receiving one does not mean you owe nothing. The underlying obligation to report income exists independently of the form (more on that below).
Source: IRS - 1099-K threshold FAQs under OBBBA.
State thresholds are lower and ignore the transaction count
Several US states mandate 1099-K reporting at thresholds well below the federal $20,000, and most of them disregard the 200-transaction rule - a dollar amount alone triggers the form.
| State | 2026 1099-K threshold | Transaction minimum |
|---|---|---|
| Massachusetts | $600 | None |
| Maryland | $600 | None |
| Virginia | $600 | None |
| Vermont | $600 | None |
| District of Columbia | $600 | None |
| Illinois | $1,000 | 4 transactions |
| Federal baseline | $20,000 | 200 |
For a non-resident LLC seller this usually only matters if your buyers or your registered business activity touch one of these states - your Wyoming LLC itself has no Wyoming 1099-K state threshold because Wyoming has no personal or corporate income tax. The practical takeaway: a platform may issue you a 1099-K because of where your customers are, not because of your total volume. Source: Thomson Reuters - state information reporting changes 2025/2026.
Who issues a 1099-K to a marketplace seller
If your Wyoming LLC takes money through any of these, expect a 1099-K once you cross a threshold:
- eBay (managed payments)
- Etsy (Etsy Payments)
- Amazon (Seller Central, Amazon Pay, Associates)
- PayPal Business (goods-and-services payments only)
- Stripe (and therefore Shopify Payments, which runs on Stripe)
- Square
- Walmart Marketplace, Mercari, Poshmark, Depop and similar resale/marketplace apps
Note that PayPal distinguishes goods-and-services payments (reportable) from friends-and-family transfers (not reportable). Sending business money through friends-and-family to dodge a 1099-K is both a PayPal terms violation and ineffective - the income is still reportable regardless of which payment rail it used.
What appears on the form
A 1099-K shows:
- Your LLC's legal name and EIN (this is why the EIN on file with each platform must exactly match your IRS records)
- Box 1a: gross amount of total reportable transactions for the year
- Box 3: number of payment transactions
- Box 1b: card-not-present amount (relevant for e-commerce)
- A month-by-month breakdown in the lower section
- The platform's name and Payer Tax ID
If your name/EIN on a platform is mismatched, the IRS matching system can flag it or the platform can apply backup withholding (24%) on your payouts. For non-resident owners, the more common failure mode is a platform asking for a W-9 or W-8 form and freezing payouts until you respond. Make sure the EIN you gave Stripe, Amazon, and PayPal is the EIN on your CP575/147C letter.
What the 1099-K does NOT mean
Three things the 1099-K is not:
- It is not taxable income. Gross is the top line. Platform fees, refunds, chargebacks, shipping, cost of goods, advertising, software, and contractor pay all come off before you reach net business income.
- It is not a tax bill. No amount is "due" because a 1099-K exists. It is a matching document the IRS uses to check that revenue is reported somewhere.
- It does not, by itself, create US tax for a non-resident. Whether you owe US federal income tax turns on Effectively Connected Income (ECI) and whether you have a US trade or business - not on whether a platform issued a form. A foreign-owned single-member LLC with no ECI generally owes zero US federal income tax even with a large 1099-K. (ECI analysis is fact-specific; FBA inventory in US warehouses and US-based staff are the usual triggers and warrant a CPA review.)
How the 1099-K fits Form 5472 - the form you actually must file
Here is the part non-resident sellers most often miss. The 1099-K is something platforms send to you. Form 5472 is something you must file yourself, and it carries a real penalty.
Every foreign-owned single-member US LLC is, by default, a disregarded entity for US tax purposes and must file Form 5472 attached to a pro forma Form 1120 each year it has a "reportable transaction" with a related party (which, for most non-resident owners, includes capital contributions and owner draws - so essentially every active LLC files). This is independent of the 1099-K, independent of whether you owe tax, and independent of how much you earned.
The penalty for failing to file, or filing late/incomplete, is $25,000 per form - and the IRS treats a pro forma 1120 submitted without the attached 5472 (or vice versa) as a failure to file. If non-compliance continues beyond 90 days after IRS notice, an additional $25,000 applies for each 30-day period, with no stated cap. Source: IRS Instructions for Form 5472.
So the actual reporting flow for a marketplace seller is:
- Platforms send you 1099-Ks reporting gross revenue.
- You (or your CPA) total all 1099-Ks plus any non-platform revenue → this is gross income.
- You subtract operating expenses → net business income.
- You report on the pro forma 1120 cover and attach Form 5472, listing reportable transactions with you as the foreign owner.
- For a no-ECI pass-through, US federal income tax owed is typically $0 - but the filing is still mandatory, and skipping it is the $25,000 mistake.
The 1099-K is the easy half (it arrives in your inbox). Form 5472 is the half that actually has teeth.
Step-by-step: reconciling your 1099-Ks at year-end
- Collect every 1099-K. Log into each platform (Stripe, Amazon, PayPal, eBay, Etsy) and download the tax-year 1099-K from the tax documents section. They are usually available by January 31.
- Confirm name/EIN on each form matches your IRS EIN letter exactly. Request a correction if not.
- Sum the Box 1a totals across all platforms = total gross marketplace revenue.
- Add non-platform revenue (direct invoices, wire payments, crypto-settled sales) that no 1099-K captured.
- List deductible expenses: platform/processor fees, refunds and chargebacks, COGS, FBA/fulfillment fees, ads, shipping, software/SaaS, contractor payments, registered agent and accounting fees.
- Compute net business income = gross − expenses.
- Prepare pro forma 1120 + Form 5472, reporting gross revenue (it should reconcile to the sum of 1099-Ks plus non-platform revenue) and your reportable transactions as the foreign owner.
- File by the deadline (generally April 15 for calendar-year filers; you can file Form 7004 for an automatic 6-month extension of the 1120/5472).
- Keep records of every 1099-K, your expense ledger, and the filed forms for at least the standard limitations period.
A worked year-end reconciliation
Numbers make the gross-vs-net gap concrete. Suppose a non-resident founder runs an e-commerce store through a Wyoming LLC and, over the year, receives:
- A Stripe 1099-K showing $90,000 in Box 1a (direct-checkout sales).
- An Amazon 1099-K showing $140,000 in Box 1a (Seller Central).
- $12,000 of wire payments from a wholesale buyer - no 1099-K (wires are not third-party-network transactions).
Total gross revenue = $90,000 + $140,000 + $12,000 = $242,000. The two 1099-Ks report $230,000 between them; the $12,000 in wires is captured only by your own records, which is exactly why you cannot rely on 1099-Ks alone to compute revenue.
Now subtract real expenses: $95,000 cost of goods, $34,000 Amazon/FBA and processing fees, $18,000 advertising, $9,000 refunds and chargebacks, $6,000 shipping, $3,000 software, $400 registered agent - say $165,400 of deductible expense. Net business income = $242,000 − $165,400 = $76,600.
That $76,600 - not the alarming $230,000 on the forms - is the figure that flows through the pro forma 1120. And for a no-ECI foreign-owned disregarded LLC, the US federal income tax on it is typically $0; the filing is mandatory regardless, and the $25,000 Form 5472 penalty is the only real money at stake if you skip it.
The reconciliation also protects you in the other direction: when you total the 1099-Ks ($230,000) and add the wires ($12,000) to reach $242,000 in gross receipts, that figure should match the gross revenue line on your pro forma 1120. If the IRS matching system sees 1099-Ks summing to $230,000 but a return reporting less, that gap is exactly what generates an automated notice - so the point of keeping your own ledger is not just to compute net income but to prove that every dollar the platforms reported is accounted for somewhere on the filing.
1099-K vs 1042-S vs 1099-NEC: don't confuse the forms
Non-resident founders often receive more than one kind of US information return and mix them up. They are not interchangeable:
- 1099-K - gross payment volume from a marketplace/processor (the subject of this article). Informational; reports gross, not income.
- 1042-S - reports US-source FDAP income (royalties, dividends, interest) paid to a foreign person, and any treaty-reduced or 30%-default withholding taken. A YouTube/AdSense or a US-licensing payout to your LLC typically generates a 1042-S, not a 1099-K. If you filed a W-8BEN-E claiming a treaty rate, the 1042-S shows the reduced rate applied.
- 1099-NEC - reports nonemployee compensation paid to a US person. A correctly documented foreign-owned LLC that filed a W-8 generally should not receive a 1099-NEC; if you do, it usually means a payer has you misclassified as a US person and you should correct your W-8 on file with them.
The practical rule: a marketplace/processor settling your sales issues a 1099-K; a payer of US-source passive income issues a 1042-S; if you see a 1099-NEC, check your W-8 status with that payer.
Backup withholding: the 24% trap
If the name and EIN your LLC gave a platform do not match IRS records, the platform can be required to apply backup withholding at 24% on your payouts and remit it to the IRS - money pulled before it reaches your bank. For non-residents the more common failure mode is a platform freezing payouts and demanding a corrected W-8/W-9 before releasing funds. Both are avoidable: confirm that the EIN you entered on Stripe, Amazon, eBay, Etsy, and PayPal matches your CP575 (or 147C) letter exactly, including the legal entity name. A single transposed digit or a "doing-business-as" name mismatch is enough to trigger a hold.
The non-resident angle: banking, EIN, and privacy
For non-US founders, three operational details determine whether the 1099-K process is smooth or painful:
Banking and payouts. Marketplaces pay into a US business bank account. The realistic options for non-residents are Mercury (most popular; broad acceptance for non-resident LLCs, strong for UK, EU, India, Pakistan, Bangladesh, Brazil, UAE founders; approval not guaranteed), Relay (good second option), and Wise Business (highest acceptance rate, multi-currency). No US visit is required for any of them. Mercury declines a meaningful share of non-resident applications, so we introduce you to all three and tell you what each looks for. Your LLC's payouts and the resulting 1099-K both key off the EIN, so keep that consistent across the bank and every platform.
EIN is mandatory. Stripe, Amazon Seller Central, and PayPal Business all require an EIN for a US LLC, and that EIN is what appears on your 1099-K. You do not need a US Social Security Number or ITIN to get an EIN for your LLC - we obtain the EIN as part of formation. (An ITIN is only needed in narrower cases, most commonly PayPal's personal verification step or filing personal US returns; we offer it as a separate $297 add-on when actually required - Amazon, Stripe, and Shopify sellers generally do not need one.)
Privacy. Wyoming does not list LLC members or managers in the public record, so forming in Wyoming keeps your name off the public Secretary of State filing. Note this is separate from federal reporting - your name and details still appear on Form 5472 to the IRS, which is private, not public.
Common mistakes non-resident sellers make
- Treating the 1099-K total as taxable income and panicking. It's gross; your net is far lower.
- Assuming "no 1099-K = nothing to file." Form 5472 is due regardless of any 1099-K, and the $25,000 penalty doesn't care whether a platform issued a form.
- Mismatched EIN across platforms, triggering backup withholding or frozen payouts.
- Relying on the $600 rule that the OBBBA repealed - the federal 2026 number is $20,000 and 200 transactions.
- Ignoring an ECI question when running FBA inventory in US warehouses - that's the scenario most likely to create actual US tax, and it deserves a CPA's eyes.
Form your marketplace-ready Wyoming LLC for $397 all-inclusive - formation, registered agent, operating agreement, EIN, and introductions to Mercury, Relay, and Wise. The Wyoming state filing fee is included. Get started →
This article is general information, not tax or legal advice. Verify current thresholds against IRS guidance and consult a qualified CPA for your specific ECI and filing situation.
