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New IRS Reporting Requirements: the 1099-K

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Online businesses be prepared! New IRS reporting requirements.

If your business accepts merchant cards for payment or receives payment through a third party network such as Amazon, eBay and PayPal, you may receive form 1099-K this year. Form 1099-K is a new form that will be completed by payment settlement entities (PSE’s) such as banks, credit card companies and third party networks to report the proceeds of payment card and third party network transactions made to payees under Internal Revenue Code 6050W.

All businesses that accepted merchant cards for payment and businesses that accepted payments through a third party network that (1) exceeded $20,000 in gross total reportable transactions and (2) the total number of those transactions exceeded 200 for the calendar year, will receive Copy B of form 1099-K.

Copy B of 1099-K will include the following information:

  • Filer’s Name, Address, Phone
  • Filer’s Federal Identification Number
  • Payee’s Taxpayer Identification Number
  • Type of Filer (PSE or Third Party)
  • Gross amount of payments
  • Monthly amount of payments

As a business owner, you will need to compare the information provided on 1099-K to your gross receipts from that PSE and verify that the amounts track with what you will report on your taxes. Bottom line – The IRS will now have a record of your eBay, Amazon and PayPal transactions, so make sure you match up and report all income on your tax return. For 2011 you won’t have to break it out separately on your business tax return but for 2012 you will.

Look for your Copy B of 1099-K in the mail soon. PSE’s are required to provide form 1099-K to payees by January 31. You may receive the form by mail or electronically. If the PSE elects to send the form electronically, you will be required to provide consent for receipt of electronic statements. Consent can be granted electronically.

For more information from the IRS, go to www.irs.gov/form1099k

If you’d like more information on 1099-K or other tax issues, contact me at 619-819-0252 or Online.

Dave Heistein is a Certified Public Accountant in the state of California. He is a San Diego CPA, as well as an advanced QuickBooks Pro Advisor and Instructor. As a small business owner, he is dedicated to educating and informing other business owners on bookkeeping and accounting matters.

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This post was written by Profit Wise Accounting