Does Square Report Your Income to the IRS

Yes, Square reports payment transactions to the IRS, and you are responsible for reporting that income on your tax return

Square sends transaction data to the IRS through Form 1099-K, which reports payment card transactions and third-party network transactions. If you received more than $5,000 in payments through Square in a calendar year, Square is required to file this form with the IRS and send you a copy. The threshold has changed several times — it was $20,000 and 200 transactions before 2022 — so check your specific year's rules if you are looking at past returns.

You must report all income from Square transactions on your tax return, regardless of whether you receive a 1099-K. The IRS knows about these transactions because Square reports them. If your reported income does not match what the IRS has on file from Square's report, the IRS will likely send you a notice asking for an explanation.

Key Takeaways

Square files Form 1099-K with the IRS when you receive more than $5,000 in transactions in a calendar year, and you receive a copy of this form.
You must report all income from Square on your tax return, even if you do not receive a 1099-K or if the amount on the form is incorrect.
The IRS receives Square's report directly, so underreporting or omitting Square income creates a mismatch the IRS will notice.
If you dispute the amount on your 1099-K, you can contact Square to request a correction, but you still report what you actually earned on your tax return.

When Square sends Form 1099-K to the IRS

Square is required to file Form 1099-K with the IRS by January 31 of the year following the transaction year. You receive your copy of the form by the same date. The form reports all payment transactions Square processed for you during the calendar year, including credit card payments, debit card payments, and ACH transfers.

The $5,000 threshold applies to the total dollar amount of transactions, not the number of transactions. If you processed $4,999 in payments through Square in a year, Square does not file a 1099-K for that year. If you processed $5,001, they do file it. This threshold has been subject to legislative changes, so the rules for 2024 and beyond may differ from prior years — check the IRS website or Square's tax documentation for the current year's threshold.

What happens if the 1099-K amount is wrong

If the amount on your 1099-K does not match your records, contact Square's support team to request a correction. Square can issue an amended Form 1099-K (Form 1099-K with a corrected indicator) if the error is on their end. This corrected form is then sent to the IRS and to you.

Even if you are waiting for a correction, you report your actual income on your tax return — not the amount on the incorrect 1099-K. If the 1099-K overstates your income because it includes refunds you issued, chargebacks, or fees Square deducted, document those adjustments on your return. Keep records of any communications with Square about the correction in case the IRS asks questions later.

Income you must report even without a 1099-K

You are required to report all income from Square transactions on your tax return, regardless of the $5,000 threshold. If you received $3,000 in Square payments in a year, you do not receive a 1099-K, but you still owe tax on that $3,000 and must report it. The absence of a 1099-K does not mean the income is not taxable.

The IRS expects self-employed people and business owners to report all income. If you operate a business and accept Square payments, those payments are business income. Report them on Schedule C (Profit or Loss from Business) if you are a sole proprietor, or on the appropriate business tax form for your entity type.

How the IRS matches your return to Square's report

The IRS has automated systems that match Form 1099-K filings to individual tax returns. If you report $10,000 in income from your business but the IRS has a 1099-K from Square showing $15,000 in transactions, the IRS will flag this discrepancy. You may receive a notice asking you to explain the difference or pay additional tax plus interest and penalties.

This does not mean you are automatically in trouble if there is a mismatch. Legitimate reasons exist for differences — refunds you issued, personal transfers mixed with business payments, or fees Square charged. But you need to be able to document and explain the difference if the IRS asks. Keep records of your Square transactions, refunds, and any personal payments you may have processed through the account.

Deductions and adjustments related to Square income

When you report Square income, you can also deduct business expenses related to that income. Square's processing fees are deductible as a business expense. If you use Square to process payments for a business, the percentage fee Square charges per transaction reduces your net income and can be deducted.

You report gross income from Square on your return, then subtract expenses including Square's fees, cost of goods sold, equipment, supplies, and other ordinary business costs. The result is your net profit, which is what you owe tax on. Keep receipts and records of all expenses you claim, because the IRS may ask for documentation if you are audited.

What to do if you did not receive a 1099-K but think you should have

If you believe Square processed more than $5,000 in transactions for you in a year and you did not receive a 1099-K by January 31, contact Square directly. Square's support team can tell you whether the threshold was met and why a form was or was not issued. Request a copy of the 1099-K if it was filed but you did not receive it.

If Square confirms they filed a 1099-K and you still have not received it, you can request a copy from the IRS using Form 4506-C (Request for Copy of Tax Return). There is a fee for this service. Alternatively, if you have an IRS online account, you may be able to view the 1099-K information the IRS received from Square.

Frequently Asked Questions

Do I have to report Square income if I only use it occasionally?

Yes. All income is taxable, regardless of how often you receive it or whether you receive a 1099-K. If you processed even $500 through Square in a year, that is income you must report on your tax return. The 1099-K threshold only determines whether Square files a form with the IRS — it does not determine whether you owe tax.

What if I mixed personal and business payments in my Square account?

You must separate business income from personal transfers. If a friend paid you back $200 for dinner through Square, that is not business income and should not be reported as such. Keep clear records of which transactions are business and which are personal. If the IRS questions your 1099-K amount, you will need to show documentation of personal transfers to explain any discrepancy.

Can I get in trouble for not reporting Square income in past years?

The IRS can assess back taxes, interest, and penalties if you underreported income in prior years. If you did not report Square income and the IRS has a 1099-K on file, they may contact you. Consider consulting a tax professional about filing amended returns for prior years if you know you missed income.

Does Square report to state tax agencies too?

Some states require Square to file similar reports with state tax authorities, but the rules vary by state. Check your state's tax agency website or ask Square whether they file state-level reports. You are responsible for reporting income to both the IRS and your state, regardless of what Square files.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.