Listen up business owners: 1099-K and you
If you are a business and process/accept credit card payments over the Internet, you may also have to deal with reporting any 1099-K forms that you receive from credit card or third party processors. Accounting for these forms accurately is important to ensure that you do not pay too much or too little tax on your money.
Report 1099-K Income
You should get a 1099-K by the end of January 2014 if in 2013 you received payments from:
-payment card transactions (e.g., debit or credit cards)
-settlement of third party payment networks (i.e., online sellers)
-gross payments that exceed $20,000, AND
more than 200 such transactions.
Why the 1099-K
IRS Form 1099-K came into existence as part of the 2008 Housing Assistance Tax Act — even though it has nothing to do with housing. This form endeavors to ensure that all retailers are reporting sales for tax purposes. It requires credit card companies, such as MasterCard and Visa, and third-party processors, such as PayPal and Amazon, to report the payment transactions they process on behalf of retailers. Therefore, if you accept credit card payments, you may end up with a 1099-K at the end of the year that summarizes all of your sales transactions with each processor.
Who gets a 1099-K?
Any business who accepts online credit card payments from customers will receive a 1099-K if its annual processing activity has met the following guidelines:
All payments made in settlement of payment card transactions (e.g., credit card);
Payments in settlement of third party network transactions IF:
-Gross payments to a participating payee exceed $20,000; AND
-There are more than 200 transactions with the participating payee.
If you have met these criteria, you will receive a copy of the 1099-K in the mail by January 31, 2014. If you believe you should have received a 1099-K and have not received one by that date, consider contacting the processor to find out if it has prepared one for you. If the processor did not prepare a 1099-K, you should report your sales on Schedule C of the 1040 return.
When you’re ready to prepare your business taxes, Wealth Management Financial Advisors and tax preparers have you covered:
Consultants and single-owner
People managing an estate or trust.