Attention business owners! Please let us introduce to you one of the newest tax form in the IRS 1099 tax form series – the Form 1099-K, Merchant Card and Third Party Network Payments – (insert applause)!
Many of you may have received this new Form 1099-K over the past couple of weeks or will be receiving it soon. So what is it and what do you need to do with it for tax purposes? Here is a brief overview.
What is Form 1099-K?
The idea behind Form 1099-K is to enhance the reporting of income primarily by those retailers who use online means to transact business – think Amazon, e-Bay, and Etsy dealers. However, it also captures activity for businesses that have significant debit card, credit card, or other financial transactions. As such this form will be issued to sellers who used third-party payment processors (i.e., debit/credit card processors, PayPal, etc.) who had more than 200 transactions or who had at least $20,000 in gross receipts during 2012. The form only provides the amount of gross receipts and does not account for any deductions or expenses.
Where to File 1099-K on a Tax Return?
This will vary depending on the forms you use to file your business income and expenses. In fact, there are some forms that have a line item listing an area for you to enter data from your 1099-K but then it is blacked out. Confused? You are not alone! There is confusion abound regarding these forms at the moment since 2013 is the second year retailers are receiving these forms and it is only the second year the IRS has to deal with them. The fact that the 1099-K reports gross income and doesn’t account for refunds, returns, or other deductions is enough to cause a bookkeeping reconciliation nightmare for some. Luckily, a reconciliation is not required for tax returns. So in short, continue to report your income as you should have been doing all along and keep good records of your income and expense activity should the IRS coming knocking on your door!
Simply Taxes, LLC is a local year-round tax preparation firm with an office located in North Raleigh. Our Raleigh accountants are ready to work one-on-one with you to help maximize your refund opportunity and to provide other tax services in the professional manner you deserve.
The information contained within this article is for general guidance only. As such, it should not be used as a substitute for consulting with professional accounting, tax, legal or other competent advisers.