Category: Tax Tips

You worked hard, got paid, and handled your business. Now somebody sends you a tax form called a 1099-NEC, and you’re wondering what you’re supposed to do with it.

At Carnival Tax, we believe making money should be exciting. Figuring out your taxes shouldn’t take away from that excitement. Whether you earned money doing hair, cleaning houses, consulting, delivering packages, or working another side job, understanding 1099-NEC taxes can help you prepare for tax season.

And before you start worrying about what you might owe, let’s talk about what that form actually means.

What Is a 1099-NEC?

Form 1099-NEC is used to report certain payments made to people who are not employees.

NEC stands for Nonemployee Compensation.

In simple terms, a business paid you for work, but you weren’t on its regular payroll.

For example, a company might hire you to design a website, provide photography services, clean an office, or help with an event.

Instead of receiving a W-2 for that work, you may receive a 1099-NEC.

The business generally sends a copy to you and reports the payment to the IRS.

How Do 1099-NEC Taxes Work?

When you’re an independent contractor, taxes usually aren’t taken out of your payments.

That means the money you receive may look bigger than a regular paycheck.

But don’t mistake that for tax-free money.

Independent contractors generally report their business income and qualifying expenses on Schedule C when filing their federal income tax returns.

Depending on their earnings, they may also owe self-employment tax, which helps pay for Social Security and Medicare.

The important part is understanding how much you earned and what it cost you to earn it.

The 1099-NEC Reporting Rule Changed for 2026

Here’s something you need to know, especially if you’ve been reading older tax advice online.

For payments made during 2025, businesses generally had to issue Form 1099-NEC when qualifying payments to a contractor reached $600.

For payments made during 2026, that reporting threshold increased to $2,000.

The IRS confirms that the new threshold applies to payments made after December 31, 2025. Certain exceptions apply, including payments subject to backup withholding.

That means someone who receives $1,500 in qualifying contractor payments from one business during 2026 might not receive a 1099-NEC from that business.

But here’s what hasn’t changed.

You still have to report taxable income even when nobody sends you a tax form.

The reporting threshold determines when businesses generally must issue the form. It doesn’t determine whether your earnings are taxable.

Can You Deduct Expenses From 1099 Income?

Yes, if you’re operating a business and the expenses qualify under IRS rules.

Let’s say you earned $10,000 doing photography jobs.

You spent $2,000 on qualifying business expenses, including supplies, advertising, and other costs directly connected to your work.

Your business profit would generally be $8,000 before other possible tax adjustments.

That’s different from paying taxes on the full $10,000 without accounting for your expenses.

The IRS generally allows ordinary and necessary business expenses. These are costs that are common and helpful for operating your type of business.

Keep your receipts and records. Not every purchase becomes deductible just because you own a business.

Do You Owe Taxes If You Only Made a Little Money?

Possibly.

The IRS generally requires self-employed individuals to file Schedule SE when their net earnings from self-employment are $400 or more.

That rule can apply even when the work was only a side job.

Having a regular W-2 job doesn’t automatically remove your tax responsibilities for independent contractor income.

Your total income, business expenses, withholding, and other tax information all matter.

What If Your 1099-NEC Is Wrong?

Mistakes happen.

Maybe the amount doesn’t match your records. Maybe the form belongs to somebody else. Or maybe you received both a 1099-NEC and a W-2 from the same company.

Don’t ignore the issue.

Start by contacting the business that issued the form. Ask it to review the information and provide a corrected form if necessary.

If you believe you were actually an employee instead of an independent contractor, that’s a separate issue worth reviewing. The IRS looks at the working relationship, including who controls how the work gets done, rather than relying only on the name of the tax form.

What Should You Bring to Your Tax Appointment?

Don’t show up with one 1099 and forget about the rest of your income.

Gather your 1099-NEC forms, W-2 forms, business income records, receipts, payment records, and any other tax documents.

If you received payments from several clients, make sure you’re accounting for all of them.

Keep track of money received through cash, checks, bank transfers, and payment apps.

And remember, money reported on a 1099-NEC should not be counted twice simply because the same payment also appears in your bank records.

Good records make it easier to prepare an accurate return.

Let Carnival Tax Help You Get It Right

At Carnival Tax, we celebrate people who work hard, build businesses, and find new ways to earn money.

Whether you’re a full-time independent contractor or someone making extra money on the weekends, we want you to understand your taxes and claim the deductions and credits you legally qualify for.

You earned the money. Let’s make sure your tax return tells the right story.

Book your tax preparation appointment with Carnival Tax, online or in person in Atlanta by appointment. Bring your 1099 forms, income records, business expenses, and tax questions. We’ll review your individual situation and help you understand what needs to be reported.

Carnival Tax. We celebrate Big Refunds and Tax Savings.

Tax situations are different. This article provides general tax education and does not guarantee that you qualify for a particular deduction, credit, refund, or other tax benefit.

Tax season should feel like getting things handled, not finding out somebody else tried to file a return in your name.

At Carnival Tax, we want you to come into tax season feeling ready, protected, and confident about your return. One simple tool that can help protect your tax information is an IRS IP PIN.

An IRS IP PIN is a private six-digit number that helps the IRS confirm that a tax return filed under your Social Security number or Individual Taxpayer Identification Number really belongs to you.

Think of it like an extra security check before your return gets through the gate.

You do not have to wait until somebody steals your identity to get one.

What Is an IRS IP PIN?

IP PIN stands for Identity Protection Personal Identification Number.

Think of it as an extra lock on your federal tax return.

When you have an IP PIN, the IRS expects that six-digit number to appear on tax returns filed under your information. This makes it harder for someone else to use your Social Security number or ITIN to file a fake return.

Anyone with a Social Security number or ITIN who can verify their identity may request an IP PIN. Parents and legal guardians can also request one for eligible dependents.

The program is free.

Why Would You Want an IRS IP PIN?

You may want an IP PIN even if you have never had a problem with identity theft.

Tax fraud can happen when personal information gets stolen through data breaches, scams, stolen documents, fake websites, or other forms of identity theft.

An IP PIN adds another piece of information that a thief would need before the IRS accepts a return using your identity.

It can be especially useful if you know your personal information has been exposed or you have already dealt with identity theft.

The IRS also says the IP PIN can protect your tax account even if you are not required to file a federal return.

How Do You Get an IRS IP PIN?

The fastest way is through your IRS Online Account.

After signing in, look for the IP PIN section under your profile. If you do not already have an IRS Online Account, you will need to create one and verify your identity.

There are other options for some taxpayers who cannot complete the online identity check.

For example, the IRS says certain taxpayers may be able to apply using Form 15227. In 2026, that option may be available to eligible individuals with adjusted gross income below $84,000, or below $168,000 for married couples filing jointly. Some taxpayers may also verify their identity in person at an IRS Taxpayer Assistance Center.

Your IP PIN Changes Every Year

Do not assume the number you used last year will work again.

The IRS creates a new six-digit IP PIN each year.

Taxpayers who enrolled online generally need to sign back into their IRS Online Account each year to retrieve the new number. The IRS says new online IP PINs are generally available beginning around mid-January.

Keep the number somewhere secure.

Do not post it, text it around, or give it to people who do not need it.

Give Your IP PIN to Your Tax Preparer

If Carnival Tax prepares your return and you have an IP PIN, make sure you give us the current six-digit number before your return is filed.

Tax professionals cannot request an IP PIN for you. The taxpayer must obtain the number and provide it to the preparer.

This is important because an incorrect or missing IP PIN may cause an electronically filed return to be rejected. A paper return may also be delayed while the IRS verifies your identity.

Do You Need It for an Older or Amended Return?

Yes.

If you have an IP PIN, the IRS says you must use the current calendar year’s IP PIN when filing federal returns during that year.

That includes certain prior-year returns and amended returns.

For example, if you file an older tax return during 2026, you generally use the IP PIN issued for 2026, not an old IP PIN from the tax year you are filing.

Watch Out for IP PIN Scams

Your IP PIN should be treated like private financial information.

The IRS says it will not call, email, text, or contact you through social media asking you to provide your IP PIN.

If somebody contacts you asking for it, do not automatically give it to them.

Your trusted tax professional may need the number when preparing and filing your return, but random callers and messages do not.

Get Ready Before Tax Season

A little preparation can save a lot of frustration.

If you already have an IP PIN, locate your current number before your tax appointment.

If you want the extra protection but have not enrolled yet, visit IRS.gov and review the official IP PIN program.

When you are ready to file, book your tax preparation appointment with Carnival Tax, online or in person in Atlanta by appointment. Bring your tax documents, your current IP PIN if you have one, and your questions. We will review your individual situation and help you file correctly while looking for the credits, deductions, and tax savings you legally qualify for.

Tax situations are different. This article is general tax education and does not guarantee that you qualify for any deduction, credit, refund, or other tax benefit.

Your cousin sent you $75 for dinner. Your friend paid you back for concert tickets. A client sent you $500 for doing her hair. All three payments may hit your phone the same way, but the IRS does not treat them the same way.

At Carnival Tax, this is one of those tax questions that gets people confused fast: Do I have to pay taxes on Cash App payments?

The answer depends on why you received the money, not simply which app was used.

Do I Have to Pay Taxes on Cash App Payments?

If someone pays you for work, services, or goods you sold for a profit, that money may be taxable income.

It does not matter whether they paid you through Cash App, Venmo, PayPal, cash, check, or another method.

The IRS says taxpayers must report taxable income even when they do not receive a Form 1099-K.

For example, say you do hair on the weekends and customers send you $8,000 through a payment app during the year.

You cannot leave that income off your tax return just because the app did not send you a tax form.

The tax form does not decide whether the income is taxable. The type of income does.

What About Money From Friends and Family?

This is where people can relax a little.

Personal payments are generally different from business income.

If your sister sends you $100 to pay you back for groceries, that reimbursement is not business income.

If your friends send you their share of the Airbnb for a group trip, that is generally not business income either.

The IRS says money sent between friends and family that is not payment for goods or services should not be reported on Form 1099-K.

Other examples can include someone paying you back for dinner or contributing toward a shared household bill.

When your payment app gives you the option, mark personal payments correctly. Do not label a business payment as personal just to avoid tax reporting.

What Is the Form 1099-K Rule Now?

This rule has changed several times, so be careful with old information online.

Under the current federal rule, a third-party settlement organization generally must issue Form 1099-K when payments for goods or services exceed $20,000 and involve more than 200 transactions during the calendar year. The previous plan to lower the federal reporting threshold was reversed by federal law in 2025.

There is an important difference for payment card transactions. The IRS says there is no minimum dollar threshold for Form 1099-K reporting when payments are processed through payment cards such as credit or debit cards.

And yes, you can still receive a Form 1099-K even if you are below the federal threshold.

That brings us back to the most important point.

Not receiving a 1099-K does not mean the income disappears.

What If I Sell My Old Stuff Online?

Selling your old couch is different from running a furniture business.

Suppose you bought a television for $900 a few years ago and later sold it online for $300.

You received money, but you sold the television for less than you originally paid.

The IRS says selling personal items at a loss does not create taxable income from that loss.

Now change the example.

You bought a collectible for $200 and sold it for $700.

You may have a taxable gain because you sold the item for more than your cost.

Keep records showing what you originally paid for items you later sell. A Form 1099-K reports gross payments and does not automatically know what you paid for the item, your fees, refunds, or other adjustments.

Do Not Confuse the 1099-K With Your Actual Profit

This one matters for small business owners.

Form 1099-K generally reports gross payments processed through the platform.

That does not automatically equal your business profit.

Imagine your business received $30,000 through payment apps. You may also have legitimate business expenses connected to earning that income.

Your tax return may need to report the income and then account for eligible business expenses separately.

Do not simply look at your 1099-K and assume that number is your taxable profit.

Keep Business and Personal Money Separate

You do not need seventeen bank accounts and a complicated bookkeeping system to get organized.

But if you run a business, separating business activity from personal activity can make tax season much easier.

Use a separate business payment account when possible. Keep records of your sales. Save receipts for business expenses. Review your payment app transactions before tax season.

And please do not wait until February to scroll through an entire year of Cash App transactions asking yourself, “Who sent me this $237?”

Future you deserves better.

What If My 1099-K Is Wrong?

Do not ignore it.

Check the name, taxpayer identification information, and payment amount on the form.

If the form includes an error, the IRS recommends contacting the company that issued it and requesting a corrected Form 1099-K.

Keep copies of your records and any communication about the correction.

Bring the Whole Picture to Carnival Tax

If you made money through payment apps, bring the records with you.

At Carnival Tax, we want to know what was business income, what was personal, what you sold, what you spent to earn the money, and what tax forms you received.

That is how we get past, “Cash App sent me a tax form,” and get to what actually belongs on your return.

Book your tax preparation appointment with Carnival Tax, online or in person in Atlanta by appointment. Bring your 1099-K forms, 1099-NEC forms, payment app records, business expenses, receipts, and questions so we can review your individual situation.

Tax situations are different. This article provides general tax education and does not guarantee that you qualify for a specific deduction, credit, refund, or other tax benefit.