As the internet and other technology forms are changing the way we live, the IRS is adjusting as well. To keep better track of revenue gained online, in 2011 the IRS introduced the 1099-K tax form, targeted towards vendors that make much of their income through online payments. Though the form was around last year, this is the first time the IRS will be using the 1099-K tax form to verify against tax returns.
According to the IRS, businesses receive this form if “you have either: (a) accepted payment cards for payments, or (b) received payments through a third party network that exceeded $20,000 in gross total reportable transactions and the aggregate number of those transactions exceeded 200 for the calendar year.”
Generally, 1099-K tax forms are given from third-party payment processors such as Amazon, PayPal, Google Wallet or Square to sellers that use those sites to make their income.
But businesses that receive this form need to be careful. What is reported on the form is the “gross amount of payment card/third party network transaction,” or gross sales amount. When filing your taxes, as an article from Upstart, a business journal explains, it’s more complicated than just that. Business must also calculate the fees and sales tax beyond the gross sales amount, as well as other business expenses. In addition, if you receive the form, make sure to calculate your own information to make sure there aren’t any mistakes.
All 1099-K forms should have been received by now, since January 31 is the deadline for them to be postmarked. And, as always, partnering with a 1099 processing service can help any small business prepare for the next tax season.