With all the 1099 forms are involved in 1099 filing taxes, it can be difficult to sort out just which ones you need to fill out and which ones you don’t. However, if you own a small business and accept online credit card payments, you need to pay particular attention to the IRS Form 1099-K. In our changing world, this newest tax document represents a shift towards online commerce and credit card payments, and there is a lot of confusion about whom needs to file and what to do if you receive one.
The 1099-K form exists due to the 2008 Housing Assistance Tax Act. While it has nothing to do with housing, this form was created to hold online retailers responsible for reporting sales for tax purposes. Credit card companies and third-party processors like PayPal and Amazon are all required to report payment transactions on behalf of retailers. If you accept credit card payments or run an e-commerce business through a third-party processor, you may find a form 1099-K in the mail. On the 1099-K you will find listed the gross payment card and third party network transaction amounts. Both are required by law to be reported to the IRS, and an IRS 1099-K is one of many documents that are designed to ensure that self-employed persons report their earnings accurately.
Previously, the income reported on a 1099-K tax form was reported on your 1099-Misc and they were not considered different documents. However, after 2008, the two have become separate. Now, the 1099-Misc form is usually used for payments made to independent contractors and self-employed persons, and the 1099-K form is used to accurately report how much money you made from card transactions online. You can file through the FIRE (Filing Information Returns Electronically system). If a payment entity has more than 250 individual returns to file in any given tax year, they must all be electronically submitted. Payee statements are due the March 31st of every year. If a payee has given consent, they may receive their documents electronically, although it is standard to mail a paper copy for their records.
If you are looking for convenience, then there’s no better way to efile 1099 tax documents than paper filing. This is the easiest way to file your 1099 taxes, and provides the most flexibility. Look for a qualified tax preparer who can help you get your documents filed correctly and accurately so that you don’t end up over or underpaying taxes. Both of these can be annoying and can cause problems in later tax years. You only need to worry about the 1099-K if you are a business owner that accepts credit card payments or works through a third-party processor. If you simply use a card to make online purchases, then this form isn’t for you.
There are two types of organizations that should file 1099-K. There are Merchant Acquiring entities, a payment settlement entity, and a third-party settlement organization in which a third party handles payments between the provider of service and the purchaser. Uber and Airbnb are examples of third party settlement organizations. If you work through either of them, you may receive a 1099-K form.
However, even if you think you might be a TPSO, you may not need to file an IRS Form 1099-K if you have accounts made for a significant number of unrelated parties, an agreement between you and your sellers to settle payments, standards and mechanisms for settling transactions, and a guarantee that your providers will be paid. You also are only required to issue a 1099-K after processing over 200 transactions and you have paid out over $20,000 to the payee over the tax year. However, because of the confusion surrounding this new form, some organizations have issued 1099-K even though they hadn’t met the requirements. If you unsure if you need to file one, speak to a tax advisor who can help you get the answers you need about your situation.
Form 1099K deadline to the IRS is on the February 28, 2019 for payments reporting through third party network transactions and credit cards payments. If you’re filing electronically, the due date will be March 31 2019.
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