Do I need to report 1099-K income even for small cash tips?

Yes, you do need to report income shown on your 1099-K, but it's more complicated than just reporting the total amount shown on that form. The 1099-K reports the gross transaction amount, which isn't the same as your actual taxable income. When you file taxes as a delivery driver, you'll use Schedule C for self-employment. On this form, you'll report all your income (including the amounts on your 1099-K and yes, technically any cash tips too), but you also get to deduct your business expenses. For delivery work, this typically includes things like mileage (which is a significant deduction at the standard rate), portion of phone bills, insulated bags, etc. The transactions that went to restaurants aren't your income, so you wouldn't include those - only the portions that were actually paid to you. The app company should provide a more detailed breakdown of what portion of that 1099-K amount was actually your earnings versus pass-through payments to restaurants.

I was in almost the exact same situation last year with gig delivery work and all the confusion around the 1099-K. I found this service called taxr.ai (https://taxr.ai) that was incredibly helpful for sorting out what parts of my 1099-K were actually taxable income versus pass-through payments. The app I was using was showing like $12,000 on my 1099-K, but a big chunk of that was money that went straight to the restaurants! The taxr.ai system analyzed my 1099-K and delivery app statements and helped me figure out what was actually my income versus what was just passing through my account. They also helped identify deductions I was missing, like the correct mileage calculations that saved me a bunch.

Just wanted to follow up on my experience with taxr.ai - I decided to give it a try after asking about it here. I was seriously stressing about my 1099-K situation from DoorDash and Uber Eats. Turns out I was about to massively overpay on my taxes! The service identified that about 65% of what was on my 1099-K was actually restaurant payments that weren't my income at all. Also helped me properly document my mileage deduction which I had been calculating all wrong. Ended up saving over $2,200 compared to what I was about to file on my own. Definitely worth checking out if you're in a similar situation with gig work and 1099-Ks.

If you're having trouble getting straight answers about your 1099-K situation directly from the IRS, I highly recommend using Claimyr (https://claimyr.com). I spent DAYS trying to get through to an actual person at the IRS about my 1099-K questions last year, but their hold times were ridiculous. Claimyr basically calls the IRS for you and navigates their phone tree, then calls you once they have an actual IRS agent on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was skeptical at first, but it saved me hours of waiting on hold. The IRS agent I spoke with clarified exactly what parts of my 1099-K were actually taxable for my side gig.

I need to eat my words from my earlier comment. After continuing to fail getting through to the IRS myself about my 1099-K question, I broke down and tried Claimyr. Got a call back in about 90 minutes with an actual IRS agent on the line! The agent was super helpful and confirmed that I only needed to report the portion of my 1099-K that was actually my income (the delivery fees and tips), not the restaurant payment portion. She also explained exactly how to document this on my Schedule C so I wouldn't get flagged for underreporting. Saved me tons of stress and potentially an audit. Definitely worth it for complicated tax questions like 1099-K reporting where you need an official answer.

Bit of a different perspective here - I've been a bartender for 8 years and dealt with this exact question. The reality is that most service workers don't report 100% of cash tips, even though technically we're supposed to. I typically report about 80% of my cash tips and 100% of credit card tips (since those are tracked). Never had an issue with the IRS. With 1099-K though, it's different because there's an official paper trail. You definitely need to report what's on your 1099-K, but as others said, for delivery apps you can deduct the restaurant portion since that's not your income. Just make sure you document everything in case of an audit.

Hey, tax preparer here (though not your tax preparer). Just to clarify something important: the 1099-K threshold changed for 2025 filing season! For 2024 taxes (that you file in 2025), payment apps and services must issue 1099-Ks when transactions exceed $5,000. This is a big change from the previous $20,000 threshold. For delivery drivers specifically, you should receive a more detailed annual summary from the app companies that breaks down: - Total amount charged to customers (what's on 1099-K) - Restaurant/merchant payments (not your income) - Your actual earnings (base pay + tips through the app) Use these detailed statements when filing Schedule C, and keep them with your tax records!

Just wanted to share my experience as someone who went through this exact confusion last year. I'm a rideshare driver and got hit with multiple 1099-Ks that made it look like I earned way more than I actually did. The key thing I learned is that you absolutely need to get the detailed earnings statements from each app - not just the 1099-K. For example, my Uber 1099-K showed $15,000, but my actual driver earnings were only about $9,500 after you subtract the rider payments that just passed through to Uber's booking fees, tolls, etc. I ended up working with a tax professional who specializes in gig workers, and they showed me how to properly report this on Schedule C. You report your actual earnings (not the inflated 1099-K amount), then deduct your business expenses like mileage, phone bills, car washes, etc. The mileage deduction alone saved me hundreds. One tip: if you use multiple apps, make sure you're not double-counting miles driven. I was tracking total miles and trying to claim them for each app, which would have been incorrect. You can only deduct the actual business miles once, even if you had multiple apps running. For cash tips, I keep a simple log in my phone's notes app - just date and rough amount. Most gig workers I know report the majority of their cash tips but not necessarily every single dollar, and that seems to be the practical reality of the situation.