Do you have questions about the new tax form, Form 1099-K? You’re not alone! We’ve created this update to provide some essential details about this form and who it affects.
What Is the 1099-K?
Form 1099-K, Merchant Card and Third Party Network Payments, is a new IRS information return. As of January 2012, “payment settlement entities” (PSEs) must use the 1099-K form to report to merchants the amount of settled payment card and third-party network transactions in the previous calendar year. Specifically, this means:
· Payments made by organizations in settlement of payment card transactions (such as debit or credit cards)
· Payments made by third-party settlement organizations in settlement of third-party network transactions if:
1) Gross payments to a participating payee exceed $20,000
2) There were more than 200 transactions with the participating payee
Resulting from the Housing Assistance Tax Act of 2008, the 1099-K form is designed to increase compliance by merchants that fail to accurately report their total sales volume on their tax returns. The IRS will match merchants’ returns against the gross sales information reported on the 1099-K.
Who Must File the 1099-K?
To clarify, organizations that have a contractual obligation to make payment to participating payees in settlement of payment card transactions are required to file a 1099-K. This includes traditional providers like banks and financial institutions, as well as third-party payment processors like eBay, PayPal, Amazon and Google. Automated clearing houses, healthcare networks and accounts payable departments are exempt.
What Does the Form Look Like?
The form itself appears similar to other 1099 forms. It contains contact information on both the entity filing the tax return, and the payee. In addition, boxes 5a-5l show the gross amount of merchant card/third-party network payments the payee received during the year, broken out by month.
What Are the Filing Deadlines?
1099-Ks are due to merchants by January 31, 2013, for calendar year 2012.
PSEs must also separately report the information to the IRS. Electronically filed 1099-Ks are due to the IRS April 1, 2013, while paper 1099-Ks are due February 28, 2013.