What is Form 1099-K?

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How it works

Third-party settlement organizations (TPSOs), such as Airbnb, Vrbo, and payment processors, are required to file Form 1099-K with the IRS for each payee who meets specific federal or state reporting thresholds. They must also send a copy to the payee, who is the vacation rental host in this context.

The form details the gross amount of payments processed for the host, often broken down by month. The host then uses this information, alongside their own financial records from their accounting software or a platform like Lodgify, to calculate and report their taxable income on their tax return.

It is crucial to understand that the gross amount on the 1099-K does not account for deductions like platform commissions, cleaning fees paid to vendors, or other business expenses.

Why it matters

Form 1099-K is critical for tax compliance in the vacation rental industry. Receiving this form indicates that the IRS has a record of the gross income processed by the issuing platform, making accurate income reporting essential to avoid potential audits or penalties.

The form provides a definitive starting point for hosts to calculate their taxable net income by subtracting all eligible business expenses from the gross figure. Failing to reconcile the amounts on Form 1099-K with the income reported on a tax return can trigger inquiries from the IRS.

See the official website for current details.

Examples

• A host in California uses Airbnb exclusively and earns $65,000 in gross bookings. At the end of the tax year, Airbnb sends him a Form 1099-K showing the $65,000 in gross transaction volume, which he must report as his starting income before deducting expenses like Airbnb's service fees and cleaning costs.
• A property manager in Florida accepts direct bookings on her website using Stripe as the payment processor and also lists on Vrbo. Provided she meets the reporting thresholds for both, she will receive two separate 1099-K forms: one from Stripe for the direct booking payments and one from Vrbo for the platform bookings.
• A host receives a Form 1099-K from Booking.com showing $22,000 in payments. The host must use this $22,000 figure as their gross income starting point, even if their bank deposits were lower, because the form reports the gross amount before Booking.com's commission was deducted. The commission is then claimed as a separate business expense.
• Two partners co-own a cabin and split the profits, but the rental's payment account is under one partner's name and Social Security Number. That partner receives the Form 1099-K for the full gross income and is responsible for reporting it. They would then issue a Form 1099-MISC to the other partner to properly allocate the income.