Question 1

What is the 1099-K threshold in 2026?

Accepted Answer

In 2026, the 1099-K threshold has reverted to $20,000 in gross payments AND 200 transactions. This applies to payments from platforms like PayPal, Venmo, Etsy Payments, and Stripe.

Question 2

What is the 1099-NEC threshold in 2026?

Accepted Answer

The 1099-NEC threshold is $2,000 in 2026, raised from the previous $600 threshold. Businesses must issue 1099-NEC to contractors and freelancers paid $2,000 or more.

Question 3

When do I owe self-employment tax?

Accepted Answer

You owe self-employment tax once your net earnings (revenue minus expenses) reach $400 or more. The SE tax rate is 15.3% applied to 92.35% of net earnings.

Question 4

When should I form an LLC for my hobby or side hustle?

Accepted Answer

Most tax professionals recommend considering an LLC once your annual net earnings consistently exceed $3,000–$5,000, you start receiving 1099s, or your activity has personal liability exposure. State filing costs range from $35 (Montana) to $500 (Massachusetts).

Question 5

What is the hobby loss rule?

Accepted Answer

The IRS hobby loss rule (IRC §183) requires you to show a profit in at least 3 of the last 5 consecutive years to be presumed a legitimate business. If you fail this test, the IRS can disallow all expense deductions, making your full gross revenue taxable.

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