1099-K and marketplace income: how to organize gross sales, fees, refunds, and payouts

Marketplace income can look simple until you compare the 1099-K to your deposits. Etsy says one number. Stripe says another. PayPal, Square, eBay, Shopify, Uber, DoorDash, or a freelance platform may deposit a smaller number after fees, refunds, shipping, reserves, or adjustments.

The form is still useful, but it needs your records beside it.

This guide is for sole proprietors, marketplace sellers, creators, gig workers, drivers, freelancers, consultants, hairdressers, barbers, and side hustlers who get paid through platforms and need cleaner records before tax prep.

What Form 1099-K is

What is Form 1099-K?

Form 1099-K reports payments received for goods or services through payment cards, payment apps, and online marketplaces. The form is sent to you and to the IRS.

You may receive Form 1099-K if customers pay by credit card, debit card, stored value card, payment app, or marketplace. The IRS also says you must report income from goods or services whether or not you receive a 1099-K.

Common platforms and processors include:

• Etsy, eBay, Shopify, Amazon, or other seller platforms.
• Stripe, Square, PayPal, or other payment processors.
• Uber, Lyft, DoorDash, Instacart, or other gig platforms.
• Freelance or creator platforms.
• Ticket resale, car sharing, auction, or crowdfunding platforms.

Gross payments vs cash deposits

Why is my 1099-K higher than my deposits?

Form 1099-K can show gross payments. Gross means the number may be before the platform subtracts fees, refunds, shipping, credits, discounts, cash equivalents, reserves, or other adjustments.

A simple example:

If the 1099-K shows $5,000 and your bank deposits show $4,100, the missing $900 may be fees, refunds, shipping adjustments, or other platform activity. You need records that explain the difference.

Fees, refunds, shipping, credits, and discounts

Marketplace sellers should not treat every platform deposit as plain revenue. A payout can include several things at once.

• Revenue: customer payments for goods or services.
• Marketplace Fees: platform seller fees, listing fees, transaction fees, and app fees.
• Commissions & Fees: payment processing, referral, or service charges.
• Returns & Allowances: refunds, returns, chargebacks, and customer adjustments.
• Shipping: postage, labels, freight, packaging, and shipping adjustments.
• Inventory / Cost of Goods Sold: product costs for goods sold.
• Transfers: money moved from a platform balance to a bank account.

Keeping these apart helps your accountant or tax preparer review gross sales, deductions, refunds, and deposits without rebuilding the platform report from scratch.

Marketplace payouts vs Revenue

Is a marketplace payout the same as revenue?

A marketplace payout is the money that lands in your account. Revenue is the sales activity behind that payout.

One deposit from Etsy, Stripe, Square, PayPal, Uber, DoorDash, or a freelance platform may include:

• Sales from more than one day.
• Platform fees.
• Payment processing fees.
• Customer refunds.
• Shipping label charges.
• Taxes collected or remitted by the platform.
• Tips, bonuses, incentives, or adjustments.
• Reserves or delayed payouts.

If you only track the bank deposit, you may miss the gross sales number or the fees taken out before deposit. If you only track the 1099-K, you may miss the fees, refunds, and adjustments that explain why the deposit is lower.

Personal payments, reimbursements, and incorrect forms

Form 1099-K should report payments for goods or services. Personal gifts and repayments from friends or family should not be mixed into business income.

Examples of personal payments include:

• A roommate paying back rent.
• A friend paying you back for dinner.
• A family member sending a birthday gift.
• A shared ride, hotel, or household cost split.

If a 1099-K includes personal payments, duplicate payments, or amounts that look wrong, keep records. Save screenshots, platform notes, messages, refund records, and any corrected form or platform response.

In Koody, use personal categories, Transfers, Owner Draw / Personal, notes, and attachments so non-business payments are not mixed into 1099-K / Marketplace Income.

What records to keep for 1099-K and marketplace income

What should I save with a 1099-K?

Keep the form, but do not stop there. The form is one piece of the record.

• Form 1099-K: the form received from the payment app, marketplace, or processor.
• Platform statements: monthly or annual reports.
• Payout reports: deposit details and payout dates.
• Order records: customer orders, invoices, or booking details.
• Fee reports: marketplace fees, processing fees, referral fees, and app fees.
• Refund logs: returns, chargebacks, credits, discounts, and allowances.
• Shipping records: labels, postage, packaging, freight, and customer shipping charges.
• Inventory records: product costs if you sell goods.
• Screenshots and notes: especially for corrections, personal payments, and odd platform adjustments.

If the platform gives you reports, download them before access expires or the dashboard changes.

How Koody helps before tax prep

Koody helps turn platform deposits and bank transactions into records that are easier to review.

• Import bank and card transactions.
• Let Koody auto-categorize rows, then review marketplace deposits and fees carefully.
• Separate Revenue, 1099-K / Marketplace Income, Returns & Allowances, Marketplace Fees, Commissions & Fees, Inventory / Cost of Goods Sold, shipping rows, Transfers, and Owner Draw / Personal.
• Attach 1099-K forms, platform statements, payout reports, order records, screenshots, PDFs, and receipts.
• Add notes for gross sales, fees, refunds, reserves, personal payments, duplicate forms, and incorrect forms.
• Split transactions by category when one payout includes income, fees, refunds, and transfers.
• Export filtered records when your accountant, tax preparer, or bookkeeper needs them.

Koody is especially useful when you manage personal and business money in one app. A payment app may include both business income and personal reimbursements, so categories and notes help keep those rows from blending together.

What to check before tax prep

Before you send records to your accountant or tax preparer, compare the 1099-K, platform reports, and bank deposits.

• Gross payments: the amount reported on Form 1099-K.
• Bank deposits: payouts that actually landed in your bank account.
• Fees: marketplace, processing, referral, app, and service charges.
• Refunds and returns: customer refunds, chargebacks, credits, and discounts.
• Shipping: customer shipping, seller postage, labels, packaging, and freight.
• Inventory: product costs for goods sold.
• Personal payments: gifts, reimbursements, split bills, and non-business activity.
• Duplicate or incorrect forms: forms that include wrong amounts or activity that needs correction.
• Transfers and owner draws: money moved between accounts or to yourself.

If a number does not match, do not guess silently. Attach the platform report, add a note, and flag it for review.

For product sellers, read Schedule C inventory and cost of goods sold. For general business records, read small business recordkeeping for taxes.

FAQs

1. What is Form 1099-K?

Form 1099-K reports payments received through payment cards, payment apps, and online marketplaces for goods or services. Payment card companies, payment apps, and online marketplaces send the form to you and the IRS.

2. Is the 1099-K amount taxable income?

Form 1099-K reports gross payments. The number on the form may include amounts before fees, refunds, shipping, credits, discounts, or other adjustments. Use the form with your records so your accountant or tax preparer can review the right income and expense details.

3. Why is my 1099-K higher than my deposits?

The 1099-K amount can be higher than your deposits because it may show gross payments before marketplace fees, payment processing fees, refunds, shipping, credits, discounts, or reserves are taken out.

4. How should I track marketplace fees?

Track marketplace fees separately from revenue. In Koody, categories like Marketplace Fees, Commissions & Fees, or payment processing fees help keep platform charges away from gross sales.

5. How should I track refunds and returns?

Keep refunds and returned sales separate from revenue. Use Returns & Allowances, attach platform reports, and add notes that explain the original sale, refund date, returned item, and amount.

6. What if a 1099-K includes personal payments?

Personal gifts and repayments should not be mixed into business income. Keep notes, screenshots, and platform records that show which payments were personal, then ask the issuer or a qualified tax professional how to handle the form.

7. How does Koody help with marketplace income records?

Koody helps separate Revenue, 1099-K / Marketplace Income, Returns & Allowances, Marketplace Fees, Commissions & Fees, Inventory / Cost of Goods Sold, shipping rows, Transfers, and Owner Draw / Personal, then export records for review.

Sources: IRS references used

Sources accessed June 19, 2026. Koody is not a tax filing service or tax advisor.

1. IRS Understanding your Form 1099-K
2. IRS What to do with Form 1099-K
3. IRS Form 1099-K FAQs
4. IRS Publication 583, Starting a Business and Keeping Records
5. IRS Schedule C overview